Get Out of the Price-Competitive Rat Race

Technology forecaster and business strategist Daniel Burrus shares pointers on differentiating and de-commoditizing your business

By Diane Merlino

From where Daniel Burrus sits, the travel industry looks, well, a bit stodgy.

He’s got some suggestions for revving things up, based on more than three decades as a successful entrepreneur, technology forecaster, business strategist, and corporate advisor to an array of Fortune 500 companies including American Express, IBM, Microsoft and Google.

This is the second of two articles exploring the practical application of principles and strategies in Burrus’ sixth book, Flash Foresight. How to See the Invisible and Do the Impossible, a Wall Street Journal and The New York Times bestseller. 

You say the new ‘golden rule’ of doing business is ‘give your customers the ability to do what they can’t currently do but would want to if they only knew it was possible.’
In a world of slower change we could ask customers what they would like and we could give it to them, and they would be happy. Unfortunately, though, our competitors are asking customers the same question and delivering the same solution, and all that means is we increasingly compete on price with thinner margins. If you ask a better question — what is it that my customers really want to do, but don’t know it’s possible — and then look and see if there’s a way to deliver that, then you’ve got a competitive advantage. 

That sounds good in theory, but how would it look in practice in the travel industry?
Let’s say you’re a hotel. Most travelers have smart phones. When they check in at the front desk, get that customer’s number by text, and instantly send them an app that can work on any smart phone. Let’s say it’s the Hilton in downtown Chicago. The app has information on the hotel’s restaurants, where they are and what they serve — they DanielBurrusHS2can even look at the menus and make a reservation. There’s a jogging trail outside the hotel that they can take a look at, and if they go for a jog they can follow their movement on a GPS, all from that app. They can also take a look at the exercise room on the app, and when they go into the room they can watch a little video on their phone about how to use the piece of equipment they’re standing right next to. You can see where I’m going with this.

Now you’ve got something sticky on their phone and you can send them offers directly. You can set up permission based text marketing — which is highly effective — for every single customer who comes into your hotel. By the way, this can be done today with technology we have.

You talk about “the curse of what works.” What’s that about?
There’s an old saying, if it isn’t broken why fix it. I’ll give you a new saying: if it works, it’s obsolete.

We’re in a period of rapid transformation. Take a look at how fast the iPad and the iPhone changed phones, and computing. What’s your primary personal computer now in terms of frequency of use? It’s your phone. Your phone is your primary computer, and it’s getting increasingly powerful every single day. You can even tap into a super computer in the Cloud on your smartphone, and have the power of a super computer in your hand.

With the types of rapid innovations in mobility, including apps, it means the more you are in a protect and defend mode the quicker you are going to be in trouble. The more you think you’ve now got it figured out, the more vulnerable you are to that competitor who comes out of left field using technology in a new way to become more relevant than you. 

That brings us to your very specific take on competing. It’s not about matching or even exceeding what your competitors in the same arena are doing — it’s the ‘go opposite’ approach. What is it and why does that approach work?
I want to make the point here: I’m not just a guy who writes about this, I practice what I’m preaching. I’ve started six companies, and three of them were national leaders in the United States in the first year. One of those was in the aviation business — in the first year  I had 37 locations in the U.S., and all of them were profitable.

Frankly, I don’t like to compete. If you’re focused on your competition — looking at the best practices of whoever the leader is and trying to match those or be as good as they are — you’re diverting resources away from accelerating your own growth. You could be looking at hard trends to see where things are going, predicting what the future best practices are going to be, and doing that.

A lot of businesses compete on price, but price is only one way to compete. You can compete on quality, you can compete on loyalty, you can compete on design, you can compete on service, you can compete on innovation — there are dozens of ways to compete.

What you want to do is focus on differentiation, on de-commoditizing all of your products and services in a continuous way. That’s a really important one for the travel industry. Every product and every service can be de-commoditized in a continuous way.

One Minute, One Thing: Daniel Burrus
 

What’s an example of de-commoditizing a product in a continuous way?
Take 7-Up. It’s kind of a commodity; it’s a clear soda, and there are others out there like it. A number of years ago I was brought in to work with Cadbury Schweppes. One of their products was 7-Up before they spun off the Dr. Pepper group.

The company had a declining market — all carbonated drink sales had been declining by 2% a year over the last decade — and margins were razor thin. They gave me a challenge: how can we do-commoditize our soda?

So we looked at the hard trend of 78 million baby boomers getting older, wanting to be healthier, and starting to watch their waistlines a lot more. I recommended they play to that hard trend, which is growing, and make all of the ingredients in 7-Up natural.

They did that about five years ago, and sales not only jumped up, but they have been increasing every year since. /uploadedImages/TW_Plus/xTW_Plus_Images_ONLY/FlashForesightlanding.jpgPredictably, competitors will see success and copy it, creating a commodity. That’s why you need continuous de-commoditization. With 7-Up you take all those natural ingredients and make them organic. In other words, you continue to de-commoditize. 

What are your observations about the travel industry?
I think the industry has let itself fall into a price-competitive route. They have not de-commoditized. They have not asked the question, what does the customer really want but doesn’t even know is possible. No customer ever said ‘I want an iPhone’ or ‘I want an iPad.’ As a matter of fact, most of the great things we have nobody ever asked for.

If you keep asking customers what they want, they will always under answer. The travel industry is notorious for doing customer surveys. I’m glad you do it, but you’re not going to get any competitive advantage from it. You’re going to continue to compete on price.

And if you are copying successful competitors, you’re always going to be behind because hopefully they are continuing to innovate. Let’s face it, there is no advantage in keeping up. If you want advantage, you have to jump ahead.

What’s your advice for jumping ahead?
I would say right now the travel industry is pretty stodgy, it moves pretty slowly. The only industries that move slower are hospitals and education. That means there is tremendous opportunity.

To lead without bleeding, look at what people are doing in other industries that could port over into yours. Stop being so busy, take some time to think bout the future, ask yourself what you’re certain about, and identify the problems you are going to have before you have them. You’ll start developing a list of must do’s and certainties that will allow you to create winning new high-margin products and services. 

Daniel Burrus covers how to recognize transformational change, the busy trap, creating a tomorrow lab inside your business, and more in Why Survival Mode Won’t Help You Survive in the Oct. 10 issue of Travel Weekly PLUS. 

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