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People as Competitive Advantage

Lots of companies claim that "people are our competitive advantage." It's funny when they make this claim because many of the people who lead those companies don't know what it means. In a classroom full of business leaders from different companies, most of them raise their hands when asked, "How many of you work for a company that says people are its competitive advantage?" But ask one of them what that really means at his or her company and you don't get a good answer. You often get that deer-in-the-headlights blank stare. Or you get what I call a B-minus answer that sounds like this:

  • "Well, our people do everything. When you call and order from us, who answers the phone? Our people. And who delivers the product? Our people. So, people are our organization. We are nothing without our people."

But it's sort of fun to ask the question: Doesn't your competition also have people? People in competing companies answer the phone and deliver product, right? This is a little like saying that electricity is your competitive advantage. No doubt, it's really useful to have electricity. With it, you can use computers and lights. It would be hard to envision running your organization without electricity, but electricity does not give your organization a competitive advantage because your competitors have electricity too. So, sure, having employees do things is valuable, but that doesn't make them your competitive advantage.

It's also funny that many of the very leaders who claim that people are their competitive advantage put little personal energy into building their workforce. They hire people after 30-minute interviews based on gut feel about "fit." They race through performance evaluations to get them out of the way until next year so they can get back to their "real work." Their top HR folks are accountants who got saddled with payroll 23 years ago and stuck around long enough that they eventually were promoted to head of HR. Their VP of HR couldn't cut it in sales so he got sent to HR where he "couldn't do too much damage." As a result of these career inroads, the person in charge of your most important asset may not do much thinking about competitive advantage, and may not even know who your competition is. There may not be anyone in your company thinking about the ways your people need to be strange.

How Can a Workforce Give an Organization a Competitive Advantage?

Three things: First, your workforce obviously must create something valuable to the marketplace—that is, there must be customers who want or need what your workforce does or creates, who are willing to pull dollars out of their wallets or budgets and give it to your company. However, if there is money to be made doing something, then other organizations are likely to do it too. Even if you are the first company to offer the desirable product or service, competitors will be drawn to the money like moths to light. Using a workforce to create something valuable simply represents the table stakes of being in business, not for beating down competition.

Second, your workforce also must create something rare, something unique that sets your organization apart. Your workforce needs to create some special sauce that makes customers say, "Sure I could get this from seven different companies, but this one does this certain thing that I like best, so I'm giving them my money." It might be the lowest price, the quickest delivery time, or the comfort of talking to a person who remembers customers' names and what they usually order. It might be any number of things, but there needs to be something that differentiates your organization and adds special value in the minds of customers.

Third: If your organization's special sauce—the unique valuable thing that you offer—is easy for competitors to copy, then you don't have a sustained competitive advantage. Wal-Mart was an early initiator of some supply chain management practices that were quite valuable and rare. By partnering with suppliers and pushing much of the stock management onto them, Wal-Mart created value for customers. How? It was more likely that product would be in stock when consumers walked in the door. It allowed Wal-Mart to lower prices because they didn't need to pay as many people to manage the stock, and also because suppliers could offer cheaper prices to Wal-Mart when they had more lead time. The supply chain process gave Wal-Mart a competitive advantage, but only for a little while because other large retailers were able to copy Wal-Mart's practices. To develop and keep a competitive advantage over a long period of time, you need to offer something valuable, rare, and hard to imitate—something that competitors can't see or maybe can't understand. Or perhaps even if they can see it and understand it, they are not willing or able to actually do it in a way that customers appreciate. For your workforce to be a sustained source of competitive advantage, your workforce needs to do something that is valuable and unique in customers' eyes and hard for competitors to imitate.

I call this a strange workforce: Definitely out of the ordinary and unexpected3; unusual or striking4; slightly odd or even a bit weird.5 If you want to beat down competition and win, then you want to cultivate a strange workforce that is obsessive—intensely preoccupied with something. Obsessing means worrying about something unevenly, much more than other things and much more than other normal people who might be mildly concerned with that same thing. You want competitors to look at your workforce, shake their heads half in wonder and say, "We wouldn't be able to do that." Have you ever worked with someone brilliant who seemed to have a "strange genius," "unique gift," or "weird instinct" for creating results? You knew you could never keep up with them because they were so talented and so obsessed that they made the others look like they are just playing around. You want to create that same reaction in your competitors and customers, but with your workforce. Are you starting to get turned on to strange? You want to be strange.

Naturally, not just any type of strange obsession will win your customers' business. Your workforce needs to obsess on things that customers value but that other workforces—in particular, your competitors' workforces—do not obsess on. Obsessing, for example, about whether or not your rotors are going to arrive next week so that your airplane engine can be shipped to the customer on time (Durham Engine Facility). Or whether the new cell phone style is really as thin and sleek as physically possible (Motorola). Or about exercise and working out and toning the body every day with the right athletic equipment (Nike). Or providing open source software so that the world is not captive to Microsoft (Red Hat). Cultivating a strange workforce that obsesses about things that customers care about is a necessary condition if you are going to get a sustained competitive advantage through your workforce. What does your workforce obsess about? What could they obsess about?

Where Will I Get My Strange Workforce?

How do you think you might build and maintain a strange workforce? Is it simply luck? Let's just start off by saying it's really unlikely that you can build a strange workforce if your organization deals with the workforce the same way as other organizations do. It is delusional to expect your employees to be extraordinary and differentiate your organization if your employee systems are basically the same as other organizations.

Your workforce systems need to be as strange as the workforce you hope to create. All your people management processes should result in a strange system that gets noticed by employees and makes them obsess on the things that customers care about the most. From this perspective, the processes your organization uses to manage people must be part of your unique way of competing. This means that job applicants and new employees should perceive your people systems as strikingly different and unexpected, slightly odd, and even a bit weird. Your people systems should inform employees and potential employees how to act so that customers notice something different and reach for their wallets again and again. For example, your hiring systems should be strange enough that some applicants who go through your process say to themselves, "This organization is too strange for me," and go work somewhere more normal...like your competitors.

As a leader, how do you know whether your people systems are set up to do this? You need to gather data that you can use to create your special sauce. And guess what? You can't use the garden-variety HR metrics that most organizations use. For example, there is a wood delivery company with a strategy that its truck drivers develop strong social ties with clients while making deliveries—to develop trust and gather information about upcoming shipment issues. To execute this strategy, the company actually needs to hire customer service reps who happen to drive 18 wheelers as well. Does it make sense for this company to hire normal truck drivers just like all the other trucking companies do, when they want to produce their own special sauce of networking and customer intimacy? Does it make sense for the recruitment metrics to be "cost of hire" and "days position is open?" Does it make sense for the hiring metrics for this job to be "years of trucking experience" and the pay metric to be "market midpoint for truck drivers" when the goal is to hire a strange, rare breed of drivers that is going to help execute a unique strategy? More likely, this company needs to have unique hiring metrics that reveal whether they are hiring drivers who are strangely attracted to a job where they are expected to get to know the plant managers and learn something when they deliver. It might take considerably longer to find that special combination of traits, and you might need to pay substantially more for a customer service rep-turned-trucker.

Doesn't sound like rocket science, does it? In fact, it sounds a lot like common sense. However, this type of system alignment is not very common at all. As you know, the customary practice is for companies to benchmark and use cost controls on people systems so that every company looks and feels to employees like every other company. And from this copycatting, race-to-the-lowest-cost approach to workforce management, a leader expects to produce a rare, unique workforce that will differentiate their company and build a competitive advantage? Good luck with that.

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