DISTINCTION:
The Noble Way to Win
By David Lapin, CEO
with Michael Forlenza, PhD
Principal Consultant
Lapin Consulting International
“Continuous improvement in
technology and operational
efficiencies are entry-level
requirements for succeeding; they
are no longer differentiators. The
greatest business opportunities
now lie in addressing issues around
the human spirit: its cravings,
relationships, and needs. Key to this
human dimension of business is the
quest for meaning and purpose. It is
through meaning and purpose that
organizations and individuals can
distinguish themselves.”
– David Lapin
The End of Competitive Advantage
to counter the increasing pressure of competition in
the 1980s. CEOs, Porter urged in his seminal article
BlackBerry was once a $20 billion giant that controlled nearly 50 percent of its market. With $5
billion in quarterly revenues, BlackBerry always
seemed two steps ahead of its competition. They
believed that their competitive advantage—its
hardware keyboard and proprietary security software—was unassailable. Its leaders considered the
company impervious to competition from Apple’s
“The State of Strategic Thinking,” must focus not on
being the best bank or the best car manufacturer
(i.e. operational efficiency), but on strategic ways to
achieve sustainable competitive advantage, either
by controlling resources to offer a lower sustainable
price or by erecting barriers around their markets
and customers that would be difficult for competitors to breach.
new keyless platform.
However, in The End of ComIn one sense, BlackBerry was
petitive Advantage (2013),
correct. It did have a unique
Columbia University Profes-
product and a remarkable
sor Rita Gunther-McGrath
competitive advantage; no
posits that the notion of
other company has yet sur-
sustainable competitive
passed its standard of enter-
advantage and all we know
prise security or improved on
about it is obsolete. Further,
its keyboard. Nevertheless,
according to Richard Foster
BlackBerry has become a
ghost of itself, with quarterly
revenue figures down around $660 million. What
happened? As the very concept of sustainable competitive advantage became irrelevant, BlackBerry
became sidelined.
The goal of competitive advantage was to simulate
the favorable conditions of a monopoly even in a
competitive environment. Professor Michael Porter
and others honed the idea of competitive advantage
and Sarah Kaplan’s Creative
Destruction (2001), rigid adherence to conventional
competitive strategy has reduced the average time
firms remain on the S&P 500 list to less than 15
years, and Adam Hartung argues in his Forbes piece
“How Facebook Beat MySpace” that clinging to old
ideas of competitive strategy destroyed companies
like MySpace.
What does the demise of an idea so commercially
fundamental as competitive advantage mean for
3
business? In his book The Management Myth (2009),
principles, values, and value-creation that business-
Matthew Stewart, after reaching the same conclu-
es claim to be about.
sion as Professor Gunther-McGrath, goes on to say
“we need a new set of assumptions about how the
world works.” But what could this new set of ideas
be?
CUSTOMERS
COMPETITORS
The Purpose of Business
The purpose of business, and indeed of all economic
activity, is to make valuable contributions to the
well-being of others. They do this directly by serving customers with products and services meant to
How, then, do you compete without competitive
advantage, and what does winning look like in the
new post-competition business environment that
we might be entering?
enhance their lives. Through directly benefiting customers, businesses also benefit their investors and
Distinction: The New Frontier
shareholders, while indirectly benefiting the larger
society of which they are a part. Because of this, we
believe business to be a noble and heroic activity.
Every organization has something very deep within
it that differentiates it from its competitors, something intrinsic to its essence: its own soul. We call
However, as much as companies currently claim
this idea DISTINCTION (defined as something
to be customer-focused, their strategic language
recognizably different in nature from something else
conveys that they are primarily focused not on their
of a similar type). Unlike competitive advantage,
customers, but on their competitors. Militaristic
which results from a company having assembled
terms such as “win,” “capture market share,” “de-
a portfolio of core competencies and activities
stroy competition,” and “create barriers to entry”
that might have little to do with its nature and can
incite a combative spirit among employees. Even
therefore be copied by anyone with the required re-
the term “strategy” comes from the Greek term
sources, DISTINCTION emerges from a company’s
strategia, meaning the “office of general, command,
“DNA,” which, like the spots of a leopard or stripes
generalship.” These terms are opposite in texture
of a tiger, cannot be imitated or replicated by any
and timber from the heroic ideas of service, culture,
other animal. DISTINCTION is business’s response
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to its newest and most powerful challenge: the end
of competitive advantage. Uncovering one’s unique
DISTINCTION and embedding it into strategy, culture, and product is business’s greatest commercial
opportunity.
Distinction vs. Advantage
DISTINCTION is different from competitive advantage in that it requires companies to differentiate
themselves from other competitors based on an
Importantly, this powerful commercial opportuni-
inherent quality that makes them unique and unlike
ty lies neither in tangible product nor in intangible
any other. Companies aim to build competitive
ideas, but in a blend of both. The opportunity for
advantage with processes, structures, and strategies
DISTINCTION is in uniquely embedding the intan-
that, in reality, can readily be imitated by competi-
gible value that a company brings to its customers
tors. DISTINCTION remedies this imitation because
into the tangible commodity it produces and deliv-
it is intrinsic to a particular company and emerges
ers. Tangible products alone, even if innovative to
from the very nature of that company at its deep-
start, quickly become commodities and lose value—
est, most essential core. Corporations (or anyone
think of computer hardware. Intangible ideas alone
offering products and services) who draw on their
often carry no price—think of Microsoft’s Windows
DISTINCTION when they design and deliver their
10, offered free of charge. The way a company links
products are able to offer their customers immense-
its intangible to its tangible is the basis for DIS-
ly valuable features that competitors cannot copy.
TINCTION. For example, Apple computers inextri-
Although such features are often intangible, they
cably embed their intangible design ideas into their
are fused into and shine through a tangible com-
tangible hardware. Amazon uniquely embeds its
modity, much like a first-class service experience
intangible obsession with customer service into its
(intangible) can be fused into the tangible com-
tangible logistical capabilities and flawless technol-
modity of air travel to distinguish one airline from
ogy platforms.
another.
5
Herb Kelleher, founder of Southwest Airlines (which
business process and structure. “Spirit” is delivered
incidentally does not offer first-class seating), articu-
by people: employees at all levels who are inspired
lated, “We’re interested in intangibles—a spiritual in-
by and can inspire others with the reason for the
fusion—because they are the hardest things for your
company’s existence and the difference it makes in
competitors to replicate. The tangible things your
the world. People who are moved by the business’s
competitors can go out and buy; but they can’t buy
higher Purpose and the vision of its leaders gener-
your spirit. So, it’s the most powerful thing of all.”
ate a company’s spirit. People who are inspired with
What Kelleher calls “your spirit” is a primary compo-
Purpose create a company of DISTINCTION.
nent of DISTINCTION that cannot be delivered by
PURPOSE
Distinction Starts with Purpose
As the foundation of DISTINCTION, Purpose identifies the unique difference an organization can make
to the lives of its customers—not just by providing
products and services that competitors cannot
replicate, but also by addressing customers’ deep,
intangible insecurities in ways that competitors
cannot.
Jim Collins and Jerry Porras wrote in their 1996
Harvard Business Review piece about the almost
sacred nature of Purpose and its strategic impor-
6
tance. A company’s core Purpose, they assert,
doesn’t just “describe the organization’s output or
target customers; it captures the soul of the organization … to guide and inspire.” They go on to show
that purpose and value-driven organizations outperform the market by 15:1 and outperform comparison companies by 16:1.
Raj Sisodia’s book, Firms of Endearment, reports
that purpose-driven companies provided returns
of 1,646 percent between 1996 and 2011. This is
staggering growth compared to 157 percent for the
S&P 500 and 178 percent for the firms featured in
the bestselling book Good to Great. Sisodia’s re-
A recent report from global communications firm
search shows that corporate purpose is the single
Burson-Marsteller indicates that companies with a
most powerful tool for affecting both top and bot-
strong corporate purpose “have a clear raison d’etre
tom line growth.
and their stakeholders understand not only what
the company does, but also the core principles guid-
PURPOSE-DRIVEN
COMPANIES
1,646%
S&P
178%
500
157%
ing its work. Purpose guides decisions, and companies with a purpose look at the imprint they and
their products leave on society as a whole, including
their employees and customers.”
The Shock of a New Way
Building a business so as to make a difference in the
world, and trusting that if done effectively shareholders will prosper, is often counter-intuitive. Many
people are not used to running a business like this.
Typically, they begin with a business plan and a
strategy to implement it. The plan turns into tactics
that drive the employees forward in their tasks. Purpose, if present at all, is just a motivational add-on.
But people are not motivated by generating wealth
In Leading with Purpose: The New Corporate Reali-
for shareholders, nor are they inspired by strate-
ties (2002), Richard R. Ellsworth also identifies the
gic plans, objectives, and targets. Individuals are
power of Purpose to inspire: “When the corporate
inspired by leaders who are passionate about the
purpose stands for a cause in which its members
meaning of their work and its capacity to make a
believe, it activates their higher motivations and
difference in people’s lives. A company guided by
deeper commitment.” The result of Purpose acti-
a purpose-driven strategy gives employees the
vation, then, is “often heroic contributions to the
opportunity to bring the whole of themselves to
firm’s competitive success.”
their work, and allows (indeed, helps) them to put a
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personal stamp on what they do. The development
world?—a company begins to discover its prima-
of DISTINCTION for the company is then an inevi-
ry beneficiaries: those that get the most benefit
table outcome.
from the organization’s distinctive capabilities.
DISTINCTION is not just about identifying a purpose, but also about making choices that give life
These beneficiaries frequently differ on a business-by-business basis.
to it and that activate it. During the time that many
The more broadly a company defines its primary
airlines bled billions of dollars, went bankrupt, and
beneficiary, the more it has to cater to the lowest
disappeared, Southwest Airlines grew from a tiny
common denominator of that customer group, mak-
regional carrier into a national powerhouse that
ing innovation less likely. It is important to narrow
regularly bests the competition
the definition of primary ben-
in the number of passengers it
eficiary and to deepen your
flies annually in the U.S. It’s not
understanding of their insecu-
a coincidence that, unlike its
rities. Trader Joe’s, a success-
competitors, it does not charge
ful, trendy California-based
bag fees; that would not align
food market, claims that they
with its purpose of democra-
sail the culinary seas in search
tizing the skies.
of new and exciting products.
To become a Southwest
Airlines is possible in any industry, but it requires
a new way of strategic thinking. Most CEOs are
accustomed to establishing what the company does,
and from that, defining its strategy and objectives.
People are then held accountable for achieving
the goals set for them. These processes are in the
wrong order and will not result in DISTINCTION.
By starting with questions about the higher purpose of the organization—What is the reason for
its existence? What difference does it make to the
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They do this in service of their
narrowly defined primary beneficiary: “An eccentric
professor with a taste for the exotic who drives a
red Volvo.” Of course, you’re unlikely to run into
this professor when you shop at Trader Joe’s, but
it focuses the organization on the type of person
for whom they design their offering. Their faithful
focus on their eccentric professor keeps Trader Joe’s
different from any other food store in their market.
It helps provide them with DISTINCTION.
It is not just in serving this specific set of people
that innovative products and services emerge. It is
also necessary to understand and address the pri-
advantage in our global, hyper-connected, and
mary beneficiary’s deepest insecurities. This further
increasingly commoditized world. This is done from
distinguishes an offering and gives it a more univer-
within the hearts, minds, and souls of the business’s
sal appeal far beyond the focused group of primary
leaders, their passions, and their values.
beneficiaries. The more valuable a company’s purpose is to the people it serves, the more energized
the workforce will be in achieving it.
Discovering an authentic higher purpose and using
it for DISTINCTION also has a powerful internal
effect. Unlocking the full power of a workforce’s human energy elicits from them what Ellsworth refers
CUSTOMERS
COMPETITORS
The Future of Business
to as “heroic contributions to the firm’s competitive
Driven by the idea of DISTINCTION, how might we
success.” Strategic confusion and the lack of a dis-
envision business in the future? To begin, we might
tinguishing purpose do the opposite.
need to redefine whom it is that we are compet-
For some companies, and many business leaders,
the process of bottom-up discovery and inside-out
strategic thinking will seem backward. Why would
you start your strategic thinking with the purpose
of your life rather than with the competitive landscape of your industry? Doesn’t strategy have to be
developed in long meetings in conference rooms
with spreadsheets piled on tables and with heads of
business units reporting on P&Ls? Isn’t it all about
the competition and how to beat them? Isn’t strategy communicated from the top, down?
In short, no: that’s backwards. Our experience
with many businesses shows that discovering the
business’s unique purpose in the world must drive
DISTINCTION—the only sustainable competitive
ing against and what a win would look like. What
would happen if we defined our competitor as the
challenge or pain we are trying to solve for our
customer? Our win would be the elimination of that
pain. For example, an airline might aim to beat the
discomfort of flying without increasing the cost, or
a bank might win when it sees its clients grow their
businesses more successfully than they could have
without it. This view of what a win looks like would
turn companies toward a customer focus rather
than a competitor focus, creating a more meaningful experience, or win, for the customer.
Redefining the win as beating the customer’s
challenge rather than beating the competition also
opens up possibilities to collaborate with compet9
itors to beat the challenge. A company could then
small; it impacts business culture and will affect the
think of itself as an orchestrator of multiple forces,
acquisition and retention of talent, especially young
including some from the competition, to solve big
talent. Increasingly, research shows that talented
problems that it could not have solved alone. Com-
Millennials want to work for companies that make a
panies that take the lead in this orchestration will be
difference and that are focused on work that mat-
the winners of tomorrow.
ters, not just on satisfying Wall Street. This kind of
This is exactly the type of thinking, for example,
that mushroomed Apple’s growth. When Apple
opened its platform to Microsoft’s Office products,
it was collaborating with a competitor to make our
technological lives better. It did the same when it
strategic innovation will lead to organizations more
suited to the future than many of our current organizations whose structures, management philosophies, and cultures are fossils of a distant corporate
past.
opened its iOS to third-party apps, some of which
compete with Apple’s proprietary apps. Airlines that
form alliances with their competitors have done
the same. Amazon, originally an online bookstore,
invited competing booksellers to use its platform to
enhance the utility of Amazon for worldwide customers. Even now, Amazon’s competitors sell their
goods alongside Amazon’s own merchandise. So
this idea is not new; it just needs to be considered
more widely and more deliberately. The opportunity
for strategic innovation becomes big for companies
Endnotes
1 Porter, M. E. “The State of Strategic Thinking,” Economist
May 23, 1987
2 Collins, J.C. and Porras, J.I., “Building Your Company’s Vision,”
Harvard Business Review, September–October 1996
3 Richard R. Ellsworth, Leading with Purpose: The New Com
petitive Realities, Stanford University Press, 2002
4 Burson-Marsteller and IMD’s report, “The Power of Purpose,”
2013
willing to change the way they think about competition and winning.
Additional Case Studies
Changing strategic focus from competitor to customer, and redefining the win to align with this
refocus, uplifts the activity of business from one
of self-interest and possibly greed, to one of noble
cause and the service of others. This change is not
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For additional case studies demonstrating the power of Distinction, please go to https://lapininternational.com/case-studies.
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David Lapin
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Twitter: @davidlapin