Not if you Want to be Great over Time...The Playing to Win strategy question that I probably get most often is: why can’t we be both a cost leader and a differentiator?...I think I get the question as often as I do for two reasons. First is that in advising on strategy, I emphasize the need to choose and in general people don’t like to choose. People like more to keep options open rather than cut them off, which is one reason why most strategy isn’t strategy, it is planning. So, when I say one of the important strategy choices is to be either a cost leader or a differentiator, people tend react by challenging why they must choose....To be a cost leader, you have to configure yourself uniquely in order to achieve a cost position that is meaningfully lower than for any competitor. That is what leading means. You can’t be a ‘leader’ if you are in the middle of the pack. ... The value of a cost advantage is that you can use it to gain share. The cost advantage enables you to lower price below the level competitors can in order to gain share from them, which illustrates the problem with being stuck in the middle. You can’t protect yourself from the cost leader (or differentiator for that matter)....In the face of competition, it is unrealistic to be both because cost leadership and differentiation take very different disciplines. A cost leader will choose standardization and will sacrifice non-conforming customers in order to maintain its meaningfully lower costs....Differentiators will pursue deep, holistic understanding of customers so that they can build the next increment of value into their product or service. They are always innovating and building the unique value and strength of their brand....Don’t waste your time thinking about being both a cost leader and a differentiator. Think instead about to which of these different paths you will commit and how to achieve cost leadership or differentiation in the space you have chosen to compete."
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