Caption: Vintage Dinosaurs and Cavemen Playset, Circa 1981, on eBay

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The 1981 Dinosaurs and Cavemen Prehistoric Action Playset, by DFC Toys, was my favorite Christmas present of all time. As a six-year-old boy, it had everything I wanted: 100 individual pieces, a diorama plastic map, three movable volcanos, two dozen angry-looking cavemen in varying aggressive poses, and all manner of sizes and colors of dinosaurs. It was also expensive. (It cost $50 if memory serves; my mother told me there was no way I was getting it.) My parents had me completely fooled when I unwrapped it on Christmas morning. I’ll never forget it.

Here’s the thing: The Dinosaurs and Cavemen Prehistoric Action Playset was objectively awful. I’m no scientist, but a few things stand out in retrospect:

  1. The most obvious: Dinosaurs and cavemen did not co-exist.
  2. Presumably, if they did, there also should be cave “women.”
  3. Neither dinosaurs nor cavemen would appreciate living in the shadow of currently-erupting volcanos. That’d get toasty. But perhaps that explains why none of the cavemen wore shirts.
  4. And I’m not sure boiling lava is green. Again, I’m no scientist, but I’ve watched the Discovery Channel. I think the product designers knew lava was red in 1981.

I could go on, but none of that mattered. Just like the little kid in “A Christmas Story” and his “official Red Ryder, carbine action, 200-shot, range model air rifle, with a compass in the stock and this thing that tells time” (aka, a clock), I was overjoyed. And, I will proudly say, I never came close to poking my eye out.

I’ll bet many of you have a similar experience: A favorite holiday or birthday gift that transcends its objective quality and touches some deeper memory. I can’t help but smile when I think about it almost 40 years later. It wasn’t the “best” physical gift I ever received – not even close. But it’s still my favorite.

If you stop reading here, just take a moment and remember that gift, whatever it was. Linger on it for a minute. I think memories are the best Christmas gifts of all, and you should give yourself one right now. I’ll wait.

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I’ve been thinking a lot this year about the difference between “best” and “favorite” – and what it means for organizational leaders (especially of smaller organizations and startups) trying to compete in an increasing haves and have-nots sort of business world.

Perhaps different ways to ask that same question:

  • As a small, independent coffee shop, how do you compete with Starbucks?
  • As a boutique clothier, how do you compete with Levi’s?
  • As a mid-tier US-based electronics manufacturer, how do you compete with Foxconn?
  • As a taxi driver, how do you compete with Uber?
  • As just about anyone, how do you compete with Amazon?

Each of the organizations I mentioned is, from an operational excellence perspective, the “best.” Put another way, is your corner coffee shop really better than Starbucks? Does it produce a more consistent cup of coffee? Does it offer more variety? Does it offer better Wi-Fi? Are the restrooms cleaner and better-stocked? Think objectively for a moment. It’s not. Likely, it’s not even close. The reason is clear: Resources. The amount of capital major organizations can pump into Operational Excellence (OpEx) initiatives will always dwarf what its smaller competitors can invest.

But what about “traditional” differentiation? Choosing a niche customer base, or delivering a unique offering? Isn’t that the way your cute little neighborhood coffee shop can separate itself?

If you stumble on something profitable, the likelihood is high that Starbucks (or Amazon, or another large organization) will decide to put you out of business. I used to think there were limits. Now, I’m not so sure. I am reminded of a story I read last week in my local paper: Amazon will sell you (and deliver within a couple of hours) a fresh-cut Christmas tree to your front door. As the Boy Scout tree farm, how do you compete with that? Is the average person really going to drive out to some poorly lit abandoned parking lot, only to overpay for a dry tree cut two weeks ago, while scratching up the top of her $40,000 SUV on the way home? This isn’t the Griswold’s Christmas. The world is moving on. Even hyper-local business models are being disrupted by hyper-large organizations with the capital to exploit every feasible profitable niche, no matter how small.

Small, niche markets no longer offer the protection they once did to small organizations. Software allows their larger competitors to make every market profitable.

If that’s true, what are your options?

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I had conversations in the past few weeks with smaller organizations who struggle with this dilemma. In one case, a small regional retailer managed to score objectively “the best” in every possible category – selection, service, delivery, add-ons – everything! It hasn’t been enough to sustain growth in the face of stiffening competition. In another case, a smaller manufacturer considered investing nearly a half-million dollars in a new integrated ERP and e-commerce portal to attract one-off business that is leaking to Amazon. They were ready to pull the trigger until they spoke with others in their professional network who made similar investments. Those colleagues saw no measurable return on their investment at all within three years.

How can that be?

You need to consider the context. That small manufacturer’s (much) larger regional competitor hired 100 people for the same type of OpEx project. And that competitor did it to try to compete with Amazon’s incursions into their previously-niche and highly-technical B2B market. $500,000 may seem like a lot of money (and it is to a small business), but it equals the salary of merely five of the 100 people at the larger company. It’s a rounding error to Amazon.

Put simply, the OpEx gap between the haves and have-nots in the economy has grown so vast that it is virtually impossible for many small organizations to have a reasonable chance to catch up. Many of those businesses must content themselves with scratching out a living on the margins (plenty of independent consultants do that), or by positioning themselves for acquisition from a larger firm (essentially, refusing to play the game).

But for those who want to remain independent, why do they expend so much effort trying to compete with Fortune 500 organizations on OpEx initiatives? Why do they still try to “be the best?” A few easy reasons come to mind:

  1. In some industries – especially heavily-regulated ones – “best practices” are defined by regulatory bodies. Those practices would seem to level the playing field, but I can tell you from personal experience that the business impact of those regulations is quite different when you have a team of lawyers and regulatory experts on staff. In these cases, “best” is simply table stakes. As only one example of many, you’re not in business as a medical device manufacturer without it. Striving for “best” seems like a differentiator in a regulated market, but it is not.
  2. The cost of operational excellence technology drops consistently, making it seem attainable to the smaller organization with fewer resources. As an example, when I began my professional career, a complex e-commerce website might cost $500,000 to build and deploy. Ten years later, you could build the same website for $50,000. Today: $5,000. It’s tantalizing to think of your own $10 million organization with the advantages of using the same operational software as your $10 billion competitor. Here’s the problem: It’s not the same technology. To continue my example, the best websites (the ones that create today’s “one-click” customer expectation) still cost $500,000 (or much more) to create. It’s yesterday’s technology that’s cheap; technology that seems dated the instant you go live. I use websites only as an example because they are what customers see. Most OpEx investments are delusions that often fail to generate their expected return on investment.
  3. Despite all those rational reasons, I think the biggest driver of continued OpEx investment is simple psychology. OpEx is easy to understand, easy to measure, and easy to operationalize. Yes, OpEx is difficult, but you can see all of the moving parts. You simply need to execute. It feels good to accomplish an objective like that. I know. I’ve done plenty of them. Who doesn’t want to be the best? What CEO is going to stand up in front of a group of employees and say, We’re going to place fourth! That’s not very inspiring.

Here’s the hard truth: If your name isn’t on the Fortune 500 list, your organization’s chances of you being the “best” are essentially zero.

Here’s the harder truth: You need to stop trying to be the best, so that you can be something better.

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The quest for favorite instead of best.

Admitting that you have no chance of being the best, and worse, that you should stop trying, might seem antithetical…un-American…un-Chinese…stupid…fatalistic…wimpy…or words even a honey badger like me is not comfortable saying in mixed company. It’s really none of those things.

Let’s tear apart the underlying logic of “best” for just a moment.

My dad had a way of talking about “best” that I still use: People can tell the difference between good and bad, but they can’t tell the difference between good and best. In other words, you don’t need to be “best” to compete with the “best”, you simply need to be “good enough.” The “good enough” standard, for most organizations, is indeed attainable. It’s simply that they invest too much energy chasing every last “sigma” of operational excellence at the expense of something far more important for their future. Instead of investing that money chasing the last smidgen of incremental operational improvement, let’s aim higher.

There’s only one thing better than best: Favorite.

Operational excellence is challenging, but it is also logical, objective, easily measurable, and therefore, easily improvable and predictable. Favorite on the other hand, is no less challenging, but it is emotional, subjective, difficult to measure, and therefore, devilishly resistant to improvement and prediction.

And yes, all large organizations want to be your favorite, and some even manage to do so … for a little while. But if you look at their public disclosures and balance sheets, you’ll realize immediately that “favorite” is not their goal, operational excellence is, usually by a factor of 10 to 1. They do that for obvious reasons: Investors understand OpEx expenses. They can measure them. The can evaluate them. They can reward (and punish) management for them.

As a smaller organization or startup, therein lies the opportunity. Without the pressure of public disclosures (for most), they can focus their energy on “good enough” OpEx investments and redirect the surplus into FavEx investments.

Unlike “best”, the beauty of “favorite” is that it can take many different forms. There is no one way to be someone’s favorite. Let’s have a look at some examples of how to make that type of investment:

  • Quirky: Trader Joe’s – As a grocer, Trader Joe’s has a limited selection, small stores, and a bevy of operational challenges. But people drive past other “better” grocery stores to shop there. Why? Because Trader Joe’s is their favorite.
  • Funny: National Library of Scotland – Being “favorite” isn’t limited to businesses. The National Library of Scotland pokes fun at its culture’s own odd phrases and colloquialisms. For example, check out their Twitter feed to learn what “Flumgummery” means.
  • Purposeful: Love Your Melon – You also don’t need to be a “national” brand. Love Your Melon makes hats (and other cool weather accessories) and donates 50 percent of its profits to fighting pediatric cancer. I know several people irrationally attached to their beanie. And yes, they’re nice hats, but are they the “best” hats? It doesn’t matter. They’re your favorite.

All of this is not to say becoming a “favorite” is easy. It is not. In many ways, this effort will be far more challenging. Most organizational leaders feel that emotional excellence is so difficult to measure and so uncertain in its return on investment that the effort would be better spent on a new piece of equipment. Favorite is squishy. (I’ve heard that particular criticism more than once from more than one CEO.)

But tell that to the fledgling Zappos in 1999. Nick Swinmurn and Tony Hsieh operationalized “favorite” with an unyielding focus on human-centric service. They innovated new ways to hire and train friendly people, they treated them well, and they let them be themselves. Yes, they measured plenty of things. And yes, they needed to deploy OpEx initiatives, but they focused on “favorite” measurements, accepting that some of the human stuff needed to go on instinct.

In 2009, Amazon purchased Zappos for nearly $1 billion.

Not bad for “squishy,” huh?

Executing FavEx programs will take at least as much dedication and effort as your most complex OpEx programs. It will focus on:

  • articulating a vision for favorite that excites you as a leader (if you’re not committed, no one else will be)
  • modeling the behaviors necessary to achieve that vision versus replying on command and control
  • fostering cultural change, and allowing “favorite” to evolve from the inside out
  • allowing your employees to help you define what favorite means, to share the mission with you (in other words, letting go)
  • finding way to measure customer joy, not simply customer satisfaction
  • building trust and authentic human relationships

Investing in “favorite” is not the same as investing in “trendy” (as is often the confusion). Trendy investments flare fast and burn out quickly. True “favorite” relationships will start out modestly, building slowly over many days, weeks, months, and years. They will only begin to pay dividends much later. There’s no way to rush them.

But here is the payoff: OpEx investments may pay off more quickly, but they diminish in value over time as others duplicate your success for themselves. FavEx investments pay off slowly, but grow in value over time, eventually becoming inimitable.

Favorite is the ultimate competitive advantage. As a smaller organization, it may be your only one.

 

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About Jason Voiovich

Jason’s arrival in marketing was doomed from birth. He was born into a family of artists, immigrants and entrepreneurs. Frankly, it’s lucky he didn’t end up as a circus performer. He’s sure he would have fallen off the tightrope by now. His father was an advertising creative director. One grandfather manufactured the first disposable coffee filters in pre-Castro Cuba. Another grandfather invented the bazooka. Yet another invented Neapolitan ice cream (really!). He was destined to advertise the first disposable ice cream grenade launcher. But the ice cream just kept melting!

He took bizarre ideas like these into the University of Wisconsin, the University of Minnesota, and MIT’s Sloan School of Management. It should surprise no one that they are all embarrassed to have let him in.

These days, instead of trying to invent novelty snack dispensers, Jason has dedicated his career to finding marketing’s north star, refocusing it on building healthy relationships between consumers and businesses, between patients and clinicians, and between citizens and organizations. That’s a tall order in a data-driven world. But it’s crucial, and here’s why: As technology advances, it becomes ordinary and expected. As relationships and trust expand, they become stronger and more resilient. Our next great leaps forward are just as likely to come from advances in humanity as they are advances in technology.

If you care about that mission as well, he invites you to connect with him on LinkedIn. If you’re interested in sharing your research, please take the extra step and reach out to him personally at jasonvoiovich (at) gmail (dot) com. For even more, please visit his blog at https://jasontvoiovich.com/ and sign up for his mailing list for original research, book news, & fresh insights.

Thank you! Gracias! 谢谢!

Your fellow human.

 

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Source notes for this article:

For this article, I decided to embed all of the appropriate links. This is more of a thought experiment and reminiscences on 25 years of OpEx and FavEx initiatives. I am also careful to shield the identities of the people I speak with … unless they tell me it’s okay. Regardless, for an article like this, I think those specifics were unnecessary.

Jason T Voiovich

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