Sameness often pays

By Freek Vermeulen

For decades, strategy gurus have been telling firms to differentiate… Because if you just do the same thing as your competitors, they claim, there will be nothing left for you than to engage in fierce price competition, which brings everyone’s margins to zero — if not below.

Yet, at the same time, we see many industries in which firms do more or less the same thing. And among those firms offering more or less the same thing, we often see very different levels of success and profitability.

What explains the apparent discrepancy? Economic theory would indeed suggest that, as a competitor, you have to somehow be different to make money.

Over the last decade or two, however, we have been seeing more and more research in strategy that builds on insights from sociology, which complements the earlier economics-based theories, yet, may be better equipped to understand this particular issue… Research in organisational sociology shows that when there is uncertainty about the quality of a product or service, buyers rely on other signals to decide whether to purchase, such as the seller’s status, its social network ties and prior relationships.

They are the forgotten drivers of firm performance. Underestimate them at your peril.

How you manage them should be as much part of your strategising as analyses of differentiation, value propositions and customer segments.



From “You Can Win Without Differentiation”