Why the Failure to Choose a Competitive Strategy Prevents Survival

Thomas Cook, the U.K. travel company, shuttered their operations this morning, leaving their clients and customers stranded, requiring the U.K. government’s help to get home. Whenever a business like this fails, there is always more than one factor to blame. There were financial deals that didn’t improve their competitive situation, but there is a more fundamental failure here, and one I have been pointing to for some time. Namely, the company failed to create enough value for their clients and their customers, either ignorant of their choices or negligent in choosing the one they believed would best allow them to compete.

Two strategies are emerging in the internet age, and they could not be more different. The first is super-transactional, and the second is super-relational. In the first model, you remove the friction from the transaction, including the friction of price. In the second, you remove the friction that comes with the disappointment of not getting the outcomes you are paying for. In the first, you eliminate human interactions with the customer (never a client, in the super-transactional model). In the second, you increase the communication with the client (if you are working on strategic outcomes, it’s a client).

In both models, you get what you pay for.

Super-Transactional

If you want to buy travel, you can go to any number of the many sites that provide airline tickets, hotels, rental cars, and vacation packages. Most of these websites compete on price, conflating travel to a commodity purchase. When all things are equal, there is no reason to pay more. Anyone with a computer and internet connection can very quickly take care of their travel arrangements, and many people prefer both booking their travel and paying as little as possible.

Let’s call this strategy Super-Transactional. There is no human being on the other end of the transaction (and it is most certainly nothing more than a transaction). The internet is the most successful and ruthless technology ever imagined when it comes to disintermediation (cutting out the middle man). You don’t have to speak to anyone, and other than the data you leave in a company’s database, no one knows you. When no one knows you, no one cares about you (at the time of this writing, I have purchased no less than one-thousand, four hundred Kindle books from Amazon.com without so much as a thank you card from Mr. Bezos). The value Amazon creates isn’t personal; it’s transactional.

It is hard to compete with a super-transactional approach. You are forced to compete with the lower price your competitor has created by eliminating the cost of genuine care. To compete, you have to remove the cost structures that allow you to create some compelling differentiation. It’s challenging to be better without the money necessary to deliver greater value.

Super-Relational

I know I am out of step with the modern narrative about relationships no longer being meaningful in sales. Those who suggest such an idea are confused by the disruptive forces we are right now experiencing. While they are right that it is no longer enough to be liked, they miss the fact that relationships are even more important, requiring more from salespeople and sales organizations. While they believe the pull is towards super-transactional, it is towards super-relational.

Some people require greater value. They want someone to care about them and their needs, help them explore their options, and give them the best advice as to what and how they should do something, and help them achieve the outcomes they are seeking. I have friends in the travel space who continue to grow while their competition shrinks. They have decided to use technology, but to provide exceptional care, more care than anyone else. When everyone zags, you should zig.

There is some percentage of the population that wants to pay the lowest price (and many more who have no choice). They pay for “good enough,” because that is what they can afford. There are others, however, who have no interest in “good enough” seeking something more, something better. On the other end of the spectrum from “lowest price,” there are clients and customers who are more than willing to pay for greater value.

The Muddy Middle

Where salespeople and sales organizations get into real trouble is by chasing those who operate a super-transactional model when that is not their strategy. They try to straddle the two poles by offering competitive prices and creating more value, one of which always gives (Hint: It’s not the lower price). Because they can’t capture enough profit to invest in creating value, they step onto the slippery slope, and over time, they slide straight off the cliff.

It’s critical to recognize that companies with the lowest price aren’t discounting or negotiating concessions; they are operating a business model. If you want to beat them, you have either play their game and adopt their model, or you have to reject their strategy by being better and charging a higher price for doing so.

When you sit in the middle of these two strategies, you end up fighting a war on two fronts. On your left, you have lower-priced providers who chip away at those clients and customers who want or need a lower price. On your right, you have competitors who create more value and command a higher price, serving those to whom “good enough” isn’t nearly “good enough.”

Picking Sides

I have cast my lot with those who intend to create value and capture value by earning it with better, more strategic outcomes. As everything that can be has been reduced to clicks, and where human beings have been mostly removed, it is wiser to go the other direction, towards super-relational. If being super-relational seems difficult, try cutting your cost structure enough to compete with a transactional model.