Designing for Competitive Advantage

March 5, 2019

Designing for Competitive Advantage

Sustainable growth is the goal of nearly every organization. Because resources are limited, achieving growth requires a fine balance between focusing limited resources on the activities that will drive growth and pulling those resources in smart ways from activities that aren’t tied to growth. Differentiation is key: For sustained growth to be possible, adequate resources must be allocated to activities that drive differentiated value. At the same time, every effort should be made to achieve efficiency and reduce the cost of activities that are necessary to the business but aren’t key to competitive advantage. 

How can HR leaders help their organizations stay both efficient and productive? There is a simple three-step process for determining which work in an organization drives differentiation and which can be held to lesser standards. 

The steps are: 

  1. Define the organization’s differentiated marketplace offering;
  2. Sort activities according to their impact on that strategy; and 
  3. Resource and align the organization in ways that enhance value creation. 

Let’s take a closer look at each step in turn. 

Step 1: Define Your Differentiated Marketplace Offering
Trying to be all things to all people dilutes an organization’s competitive advantage. A better solution is to create an offering that highlights what makes an organization stand out from the crowd. Doing this will also help you identify areas of non-differentiation where you can afford to be average or even below-average if necessary to keep costs contained. 

Step 2: Sort Activities According to Impact on Strategy
Since nearly every business activity has an important function, it’s not always easy to determine which activities to prioritize. This of the work along a continuum of most strategic to least strategic. As you do this, keep in mind that each activity is very important—it just might not be of the same strategic priority to the company. For example, if payroll stopped, the organization would very quickly cease to function. However, fine-tuning the payroll process won’t help most organizations win in the marketplace. 

Typically, only a very few activities will be truly differentiating. For this reason, expect the list of truly strategic work to be short, thus allowing you to focus your limited resources. 

Step 3: Design and Resource for Value Creation
Once you have determined which work contributes directly to your organization’s intended differentiation, it’s time to prioritize and allocate resources among them. For example, if your value offering hinges on having the best customer service, your resources and organization design must support this differentiating factor. As you do your planning work, ask yourself: “What activities in the organization contribute to delivering exceptional customer service?” Answers could include “training our people to deliver exceptional service,” “investing in technology that enables exceptional service,” “hiring exceptional people,” or combinations of different things. These, then, become areas to target for resource allocation. 

The rest of the work in the organization should be approached with an eye to cost efficiency, which will allow the organization to funnel more resources into the strategic work of the company. 

Becoming Competitive by Design
Every company makes competitive claims. But most organizations aren’t actually competitive by design. An organization that gives lip service to competitive value but doesn’t perform the activities necessary to drive that value any differently from competitors rarely experiences sustainable growth. 

To help an organization create value above and beyond the competition and drive growth, it’s necessary to resource strategic work in ways that go above and beyond. HR leaders who help the business in examining the strategic impact of work can help support business growth efforts. 

The Authors: 

Reed Deshler is Principal of AlignOrg Solutions.