Differentiation is a classic strategy. You can read a lot of writings by Porter about the benefits of this classic strategy and how you can implement them. Yesterday, I was watching at the TV an interview to the manager of the Spanish soccer team Atletico de Madrid finalist of the Champions European Cup and he said that his team is the team of the people (the team of the masses). I always was a fan of his traditional neighboring rival, and other finalist of the Champions Real Madrid. This interview sounded very odd for me, as Real Madrid always had a more extended number of followers out of the city, and At. Madrid’s followers usually thought that they were the pure team of the city in front of a mixed team for the people from the countryside (searching for a disparaging argument thinking that those people have less education, culture and international vision).
If we look at the political world we can see how political parties build their strategies around the same concept. Defenders of the right side values present themselves as the parties of the people, although they usually are defending the interest of the capital and banks more than other political options (at least in theory).
This anecdote makes me to think about differentiation and if in our complex current world it is possible. It is well-known, all over the world, that Real Madrid represents the excellence of that sport in the sense that is always searching for the best players in the world and it has the highest number of European Cups (today Champions Cup), and it probably the most international soccer team in the world. If we translate this to the business world: There is not a relationship between the excellence of the product and the origin of their workers and clients. It is only a matter of business strategy. Soccer is a business where incomes depends more on the number of fans than on a marketing price strategy. Real Madrid and Atlético de Madrid are selling a very different number of T-shirts all over the world due to the different strategy and the different results of their business strategies.
Looking at Real Madrid we can find that nowadays it is possible to reach the masses through a strategy of differentiation, even searching for excellence, the only thing you need is the proper marketing strategy (related to price and so on). This is not new under Porter’s concept, in fact, leading companies usually follow this kind of strategy preserving their leadership through investments in R & D and innovation.
There are some reasons in order that we do not choose a differentiation strategy to lead an industry and they have been analyzed in classic strategy yet. But today there is a new element that it should be considered when we are choosing a strategy.
As complexity increases it is more difficult (and costly) to implement a differentiation strategy. Differentiation requires an identity, a brand with a set of associated values that let the clients to identify the benefits that our products are offering. The creation of this identity is not easy in a complex economy, the trademark Real Madrid is the result of more than a hundred years of history contracting the best players and winning more European Cups than anybody. Atletico will not be able to build this kind of identity in the next few years. He can only be “people’s team”.
A complex economy makes very difficult to implement a differentiation strategy because complexity makes very difficult to create the proper identity. Complex systems have the characteristics of having a lot of internal uncertainty and moving easily this uncertainty from one point to another one in a fast way. As identity is a synonym of certainty, the simpler the industry the easier the way to create an identity of excellence. In a complex organization masses will usually win.
For instance, how could I defend my own work if people think that it has been developed by a neighboring colleague because my organization gets a benefit if clients think so? How could I start a differentiated business if a government is interested in selling a country brand transmitting that all the people in my country are equal to my business in order that its public officials can seem similar and they can be accepted easier by other countries in international forums? How can I cope with uncertainty when certainty provides less money than uncertainty to the subsystem where I am?
Perhaps, Atletico’s manager is right. Perhaps, as only a few organizations have a similar history in its market to that of Real Madrid, the best marketing strategy in a complex world is to be “people’s company” (for instance a cost leading strategy). Perhaps, a differentiation and excellence strategy requires a history of many years in the market or an expensive marketing investment to assure certainty when the economy is very complex.