Investing to be world-class at something does not lead to winning. All it does is increase the cost of losing. Instead, pick the one area in which you are going to be best-in-class and invest what it takes to make that your competitive advantage. Manage everything else to be above averagely strong or cost-effectively good enough.
Let’s make sure we’re all using the same definitions.
- Best-In-Class – Superior: Top 10%
- World Class – Parity: Top 25%
- Strong – Above average: Top 50%
- Good enough: Scale or outsource
If you agree with those classifications – and you should – the “world-class” trap is self-evident. World-class is not as good as best-in-class and will lose to best-in-class every time. At the same time, world-class is more expensive than strong or good enough.
We can be even more specific. Per my earlier article, “Accelerating Through a Strategic Point of Inflection,” invest to be best-in-class at one of design, production, delivery or service. Invest to build either strong supporting services or shared services. Do the required marketing and selling. Scale or outsource the rest.
At design-focused organizations like Apple and Gucci the inventors and designers are the stars. The rest of the organization exists to support those people. Some of those supporting services are internal and worth investing in. Others are outsourced. For example, the documentary “Dior and I” depicts the creation of Raf Simons first couture collection for Dior and how he got his ideas from paintings, architecture and nature.
Note that all organizations must sell and market. Apple does this particularly well. Don’t think for a moment that its stores’ main purpose is anything but marketing.
Production-focused organizations like Coca-Cola and Zara operate with hierarchical command and control. Coca-Cola’s standard is that every Coca-Cola served everywhere in the world should taste the same. Zara has built a system that can go from catwalk to stores in 15 days. A big part of this for both is leveraging others’ distribution systems. In Coca-Cola’s case, this means bottling companies’ trucks. Coca-Cola and its bottling partners are so intertwined it’s often hard to see where one stops and the other begins.
By definition, you can’t deliver on your own. Being best-in-class at delivery requires mastering your network of alliances. These could be peers, customers or suppliers. This is where Amazon really shines. The linkages between those producing the goods it sells and the separate organizations that physically deliver them are seamless. This requires a matrix organization and leadership committed to its role in enrolling others in the system.
The best service-focused organizations are passionate about their customers or guests’ experience. For them, delighting guests is more important than anything else. They push decisions down and out as much as they can so the people directly interacting with their customers and guests are freed up to make decisions and take actions to delight those customers and guests.
Supporting services versus shared services
Note design and production-focused organizations will need strong supporting services and delivery and service-focused organizations will need strong shared services. On the surface, the services look similar and include things like finance, information technologies, human resources and legal. The difference is that supporting services are subordinate to designers or producers, following their direction, where shared services are peers, collaborating with delivery and service people to realize a meaningful and rewarding shared purpose.
Michael Porter told us that strategy is choosing what not to do. My partner Harry Kangis likes to say that choosing not to pursue a bad idea is easy. The hard choice is choosing not to do something that’s a good idea for someone else. This is where world-class lands. Let someone else be best-in-class at that so you can devote more effort to being best-in-class at what you do.