Differentiate or pay

Heads × Perikom Event

One thing became clear at the Heads × Perikom event: differentiation is not just part of the strategy, it is its core.

Heads Managing Director Ralph Hermann opened the discussion with a humorous introduction, noting that the topic of ‘being different’ had been handed to him at birth in the form of his identical twin brother. He described how a lack of distinguishability in his childhood gave chance too much power. He realised early on that clear differentiation creates orientation and that relevant differentiation creates identity.

Heads Senior Brand Consultant Sina Frank picked up on this keyword, vividly demonstrating how Heads uses its Heads Brand Profiling™ to develop a brand identity that gives companies a decisive advantage. It is often unusual questions that lead to the unique core. When asked whether consciously ‘wanting to be different’ might also pose a risk to companies, Sina Frank replied with conviction:

“It is a risk not to be different.”

Using concrete examples, she showed how clear distinction can significantly increase the attractiveness of corporate and employer brands. She identified a particular need for improvement in employer branding, stating that good differentiation creates clarity about who really fits in with the company and who doesn’t. However, this only has an effect if it is actually put into practice.

It takes two to tango

Sina Frank adds that what makes it difficult to develop effective differentiation is the fact that brand strategy is often developed after corporate strategy. However, the two topics are inextricably linked: a brand without strategy is arbitrary, and strategy without a brand is merely rational. Developing them in parallel leads to more effective results.

From a scientific perspective, differentiation is a value driver

Our guest from Harvard Business School, Prof. Felix Oberholzer-Gee, explored this topic from a scientific perspective. First, however, he himself differentiated with a buzzword rarely heard in current economic debate: optimism.

He pointed out that the return on invested capital (ROIC) for S&P 500 companies has been positive in the vast majority of cases over the last ten years — a strong signal in economically turbulent times. According to Oberholzer-Gee, there is also reason for confidence in Switzerland: although there is a lack of high flyers with an ROIC of over 15%, there are significantly fewer companies with negative returns on capital. A solid, healthy foundation – typically Swiss.

He then explained the relevance of value enhancement using his simple yet convincing strategy model. Ultimately, a company must achieve two things:
1. Increase customers’ willingness to pay.
2. Strengthen employee loyalty (willingness to sell).

Every strategy should focus on these two factors. Without added value, margins will decline while labour costs rise and employee retention decreases. His book on this subject, Better, Simpler Strategy: A Value-Based Guide to Exceptional Performance, will soon be published in German.

Practical examples and straight talk

Then the charismatic speaker warmed up: it is astonishing how complex many strategies are, yet how little work is actually done on differentiation. When it comes to increasing value for employees in particular, there is a lack of courage to be different. Employees are offered the same benefits everywhere, and companies rarely differentiate themselves in the battle for talent.

A vivid example of an increased willingness to pay is a cinema that also offers a crèche, which is a real relief for young parents. The result is a higher ticket price that is perceived as justified, while capacity utilisation is improved at the same time.

An example of increasing willingness to sell is the fashion chain GAP, which offers its employees a platform for swapping shifts. The result is massively higher loyalty and better sales figures, because employees work when they are most productive.

It is this kind of added value that matters. Prof. Felix Oberholzer-Gee asks the uncomfortable question that should be at the forefront of everyone’s mind when it comes to corporate and brand strategy:

‘Who would miss your company if it were no longer there tomorrow?’

Anchoring differentiation at the top

Frank Nehlig, Head of Communications, Marketing & Public Affairs at the Tertianum Group, joined the panel of speakers. He emphasised the importance of differentiation and of anchoring this focus at the top of the company. Without this, everyday working life will be dominated by operational urgency and the focus on the essentials will be lost.

The panel agreed that a sophisticated, complex corporate strategy is of little use if you cannot explain in two or three sentences how you create added value for customers and employees in a differentiated way. Focus is crucial, but simplicity is not easy.

In conclusion, differentiation is the key to added value and therefore the core of the strategy. Without differentiation, there is little identity. Only a strong identity leads to strong identification among customers and employees alike.