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Hedgehog Principle: An antidote to commoditisation

16th Aug 2018
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I was in Moscow earlier this year, delivering a workshop for one of Russia’s major oil companies.

It was interesting to discuss with them the issues they are facing that drove them to the decision that world class skills in Customer Experience Management is what they need.

It reminded me of when I first started working in Manchester Business School, back in the early 2000’s. We were regularly consulted by businesses facing a similar challenge, which was that the products or services they were offering were becoming seen by customers as a commodity, with little or no difference between what was available from the various different suppliers. The inevitable result of this is price pressures and reduced margins. As Professor Michael Porter from Harvard Business School put it – “When everything is equal, people buy on price”.

Back then I learned than that there is an antidote to commoditisation, and it is customisation. Commoditisation may drive you down the price and margin spiral, but customisation, if done well, can drive you back up again.

There are many ways to customise a product or service. The one I understand is how to employ Customer Experiences Management techniques to achieve differentiation and competitive advantage. If it is done well, you may then be providing products or services that others can supply, but you become the only one that does it the way you do.

Hedgehog principle

Here are a few examples of this from different sectors.

  • In Banking there is First Direct and Handlesbanken.
  • In Airlines there is SouthWest in America and Virgin Atlantic in the UK.
  • In Travel there is Travel Counsellors and SeaDream Yacht Club.
  • In UK Hotels there is Premier Inn and The Dorchester.
  • In Toiletries there is Lush and Joe Malone.
  • In Personal Insurance there is LV.
  • In Coffee there is Nespresso.

These organisations supply products or services that are also available from many competitors. But they have all found ways to make the way they do it different from any competitor. Professor Jim Collins from Stamford University calls this the ‘Hedgehog Principle’. That’s being the absolute best at something that matters to customers and that nobody else can copy. (For the Hedgehog it is its unique approach to self-defence).

So what is your Hedgehog Principle? Have you developed a unique way of doing what you do that customers value (and so will pay for) that no competitor can copy?

If you do this well, you may even achieve the ultimate goal of becoming your customers ‘favourite’ supplier. And no one can compete with that!

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