Establishing competitive advantage is one of the basic tenets of business strategy.  Companies must establish a way of standing out from competitive offerings and being perceived as different and better from those offerings. One business aspect that I believe is underutilized as a lever for competitive advantage is business size and scale.

Often a large business size is equated with large distribution and that is considered a competitive advantage.  However in many cases that kind of advantage is not sustainable or it doesn’t reflect true customer preference.  It’s a forced advantage.  For example years ago Dasani, the bottled water brand, was able to steal share from long established competitive brands simply because the Coca Cola bottling company picked it up and distributed it and therefore beat competitive offerings for shelf space.

There are other more meaningful and sustainable ways of using large size and scale as competitive advantage.  The case in point here would be Wal-mart.   The company has thrown its weight behind the green movement and is using their heft to make a difference that makes a difference to consumers.

A couple of years ago Wal-mart launched their consumer-facing green campaign which effectively turned the size of the company from something to be criticized and protested into an important and compelling benefit.  Each of the ads explained how the sheer number of Wal-Mart shoppers (“all 200 million of us”) made it possible for each individual purchase to be a part of a big impact on our planet.  The 7 national TV spots and 16-page magazine inserts magalog they ran – not to mention radio and online ads, informative websites, and in-store signage – may have been one of the most widespread campaigns educating Americans about their role in protecting the environment.

The company continues to promote its environmental efforts and to advocate consumer participation today.  Wal-Mart’s comprehensive, integrated initiative is a powerful force with the muscle to dominate consumers’ mindshare and purchases because of the company’s size.

On the flip side, small scale and size is typically viewed as s competitive disadvantage. Most small brands want to get larger so they can compete more effectively with larger brands.  However a smaller sized scope can be a unique competitive advantage if it is used properly.

One example is the Joie de Vivre boutique hotel brand.  (By the way, I enjoyed getting an insider’s look at JDV in the book Peak:  How Great Companies Get Their Mojo from Maslow.  It’s written by Chip Conley, the Founder and CEO of the JDV brand.  And it not only introduces a provocative philosophy toward business based on Abraham Maslow’s concept of the Hierarchy of Needs; it also tells the remarkable story of JDV.)

JDV has only 40 hotel sites compared to Westin, for example, which has over 200.  Some may view that as a disadvantage because they don’t have the awareness that a larger brand like Westin enjoys and they’re only able to serve a certain segment of customers because their market penetration is so low.

But the company actually uses their small size to their advantage by customizing each location.  The Carriage Inn in San Francisco’s SOMA district has a “literary” theme while its site in the city’s Japantown, Hotel Kabuki, features a “unique blend of Eastern and Western influences.”  And their website has a great feature that functions basically like a dating service for travelers who are seeking a hotel.  By completing an online questionnaire about yourself, the “hotel MATCHMAKER” tool suggests the particular sites that would be appropriate for you. In doing so, they deliver a meaningful benefit to customers and increase the likelihood customers are going to enjoy their experience at one of their hotels.

There’s no way a larger hotel brand like Westin can do this — and it wouldn’t make sense for them to do so because their stronger market presence and uniformity across their 200+ sites are the bases of their competitive strategy.  But because JDV has a small size and scope, they’re not only able to do this, they are a thriving business as a result.  Their annual revenues now total just under $200MM.

In today’s economic climate and with so many categories with fierce competition, you need to use every advantage you have.  And size is just one of them.

related posts:

• the opinion in imho
• if a brand has something to say, say it

The TV show The Biggest Loser started up again this week.  The show features contestants who train, diet, and compete in challenges to see who can lose the most weight.  I started watching the show last season because a client of mine is a sponsor and I got hooked – not only is it inspirational to see how the contestants’ lives are completely transformed, but also the show teaches some great lessons about competing and succeeding in business.  

Last year I did a short Twitter series on the business lessons I learned from the show – here’s a more complete list of the 9 things I’ve learned about business from The Biggest Loser:

1:  keep metrics simple – the show uses only one measure (pounds lost) to evaluate the contestants’ progress.  Clearly they are improving their health and their lives in so many other important ways, but the one number makes tracking easy.  Likewise, in business we should use metrics that are easy, clear, and memorable.

2:  success requires both mental and physical strength – the most successful contestants are those who are mentally tough enough to withstand the politics and emotions of the show, as well as physically strong enough to compete in the challenges.  In business, I think mental strength is strategy and physical strength is execution; we need both.

3:  don’t get distracted from the goal – some contestants make the mistake of emphasizing winning a particular challenge just because they want to beat the others, when they should instead be focused on the end result which is weight loss.  It’s just as easy for us businesspeople to get distracted by small issues or fads or personal agendas.

4:  the tortoise always beats the hare — time and again, taking a steady and sure approach in the challenges wins over starting strong and then flaming out.  In business, consistency and the wise use of all of our resources ensures we cross the finish line too.

5:  excel at what you can control – when competing, it’s tempting to fixate on what the competition is or isn’t doing.  Problem is, we can’t control what others do.  Our competitive strategy should be grounded in focusing on our own excellence and playing to our strengths first.

6:  be prepared – like most shows, The Biggest Loser surprises the contestants with challenges at random times.  Likewise, we never know when our businesses will be tested by customers, competitors, or even market conditions.  We should always have our game on and never think that something we do won’t get noticed or won’t matter.

7:  up your game – just as our bodies get used to exercising over time and so they need increasingly harder workouts, business needs innovation and continuous improvement.  How many companies have lost important ground while they were resting on the laurels of their last successful new product?

8:  ask for help – the contestants who sought out extra support from the trainers and their friends seemed to have more success.  Likewise, collaboration and partnerships are important to businesses now more than ever.  Companies that try to go at it alone miss out on the resources, ideas, and support that business partners, customers, and even competitors can provide.

9: test your limits — we won’t know what’s possible until we do.  Some contestants pushed themselves beyond what they perceived their limits to be and were able to do things they never thought they could.  Businesses should also challenge the past. Calculated risk taking is the key to growth.

Thanks for listening and enjoy the show!

Apparently my “Outside Insights” column, How to Defeat McDonald’s**,  on QSR Magazine‘s home page has prompted concern among the folks at McDonald’s.  It was intended as a service piece for fast feeders looking for insights on how to establish competitive advantage — but the Golden Arches media relations team seems to view it as a judgmental report on their strategies.

Quite frankly, I’m surprised by their reaction — but I’m curious to hear what you think.  Here’s the original piece, followed by the comments submitted by a McDonald’s spokesperson (she initially emailed these comments to me with a request for a correction to be issued.)

My “Outside Insights” column:

How to Defeat McDonald’s**
Taking advantage of a competitor’s innovation could mean rewards for any company—no matter the size.

Quick-serves fight in a hypercompetitive environment. Brands duke it out with surprising new products which seem like punches coming out of nowhere and low blows of heavy discounts or free giveaways—not to mention the pot shots lobbed between dueling sassy advertising campaigns.

All of the category in-fighting can lead to a tit-for-tat approach to marketing in which companies counter each other’s moves with products and deals so similar it’s no wonder consumers often confuse one brand’s promotions for another. This kind of combat is necessary to sustain traffic counts, but quick-serves should also be on the lookout for opportunities to rise above the fray, dominate their challengers, and solidify a sustainable victory.

Burger King has such an opportunity now. McDonald’s has blinked, setting its sights on Starbucks and launching a $100 million advertising spend to promote its new coffees. McDonald’s describes McCafé as its largest product launch in 30 years and promises many more McCafé experiences to come.

Regardless of whether or not these efforts will be successful, having all of McDonald’s eggs in one basket is good news for Burger King. Burger King can fill the void in the conversation about food and promote the superiority of its food preparation and products. Lately Burger King hasn’t been talking about its key product differentiators—flame broiling and Have It Your Way—but now is the perfect time to bring them to the forefront. These product attributes are the brand’s strongest competitive advantages, and McDonald’s has left itself open for attack.

McDonald’s isn’t the only quick-serve that has made itself vulnerable. Chinks in the armor usually emerge during launches of ancillary products, PR blunders, or M&A activity. Both Pizza Hut and Baskin-Robbins have recently blinked, pouring millions of dollars into pasta and soft-serve ice cream introductions respectively. By neglecting their core businesses and vying for consumers’ attention in new categories, these brands have created great opportunities for their competitors.

Challengers can take advantage of these opportunities by:

Acting fast: The window of opportunity may not last long. Fortunately most chains aren’t shy about touting big plans, so if you’re astute enough to sense a “blink” in the making, you can be at the ready to launch an offensive attack as soon the other guy’s initial media burst starts to trail off.

Hitting them hard: This is the time to leverage your core competitive strengths. Shore up what you do best and promote the heck out of it. If necessary, you may have to be overt about your strategy—perhaps calling out your competitor for its foolishness may be the best way to draw attention to your offering.

Staying focused: It may be tempting to follow your competitor’s moves or to take a breather while the pressure is off. But attempts to engage in the new game would only seem like efforts to compensate for a weakness—and backing off wastes the opportunity. A confident, offensive move is what’s called for.

By going for the punch when the competition isn’t looking, quick-serves have the chance to differentiate themselves in a meaningful and memorable way. Instead of fighting over chump change or market share gains of a few hundredths of a percent, a well-timed, well-placed push can secure a big win.

Case in point: Earlier this year when it seemed that Burger King was the one with its eye off the ball, McDonald’s made a big gain. McDonald’s had blanketed the market with dollar deals while Burger King was off featuring a tie-in with a TV series. The result? McDonald’s comp store sales rose 4 percent in the first quarter, while Burger King’s were only up 1 percent.

With competition so fierce in the quick-service arena, brands must exploit every advantage. Those who are fighting to win will be ready to hit with their best shot when the other guy isn’t looking and let the consumer declare a T.K.O.

Comment submitted by McDonald’s spokesperson:

My name is Danya Proud, and I serve as a company spokesperson for McDonald’s USA.

This article is missing a lot of the facts about our business and how we continue to promote our core menu items and customer favorites.

We most definitely don’t have, “all our eggs in one basket,” as this article suggests. These assumptions are not only incorrect, but misleading to QSR’s readers, and our customers.

I would be remiss if I didn’t point out the tremendous success we have had, and continue to have, through promoting our core menu – including Big Mac, Chicken McNuggets and most recently, Quarter Pounder with Cheese.

And, while McCafe Coffees and the promotion of our new line of mochas, lattes, cappucinos and hot chocolate continue to be a significant area of focus, and business opportunity for us, rest assured, we have not, and will not, take our eyes off the fries, or, any of our other core menu items, for that matter.

As always, we continue to have a holistic approach to all of our marketing efforts, to ensure a balance between promoting new menu items and our core equities.

Our customers are at the center of everything we do. Now more than ever, we are looking to provide our valued customers with everyday affordability, across our entire menu.

Thanks for the opportunity to provide the facts about our business.

What do you think?

I’m surprised that McDonald’s would take my POV as a factual report on their business — and be concerned enough to write their own “correction.”  I’m a strong advocate for managing all of a brand’s touchpoints, but this seems to be taking it a bit too far.

Am I wrong?  Also, please let me know what you think of the piece itself.  Thanks!

** FYI:  I had submitted a different title for the piece (“When the Other Guy Blinks”) — QSR Magazine’s editor changed it to “How to Defeat McDonald’s” — perhaps that caused more ire?!