Let’s face it. Without a powerful, industry-dominating strategy, you’ll waste your time trying different tactics and spending marketing budgets to get very little traction in the marketplace.

You may manage to stay profitable and solve problems as they happen. However, in today’s uncertain global economy, it’s more important than ever to have a winning strategy that will make your ecommerce business thrive and achieve extraordinary growth even in a struggling industry.

With the fierce competition out there and the easy entry-level in the ecommerce business, you can’t just rely on putting your online store on the web doing the same things everyone else is doing and hope that the sales will start pouring in.

What you need is a blueprint to differentiate yourself and scale-up.

The growth guru Verne Harnish developed a step-by-step framework for business domination — called the 7 Strata of Strategy described in his book Scaling Up. He has spent the past three decades helping entrepreneurs and leaders develop their strategy and quickly scale-up, so I highly recommend the book.

The components of the 7 Strata of Strategy, when done right, will give your business the edge. You will be able to stand out in the market, crush the competition, and achieve top-notch revenue growth.

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If you’ve already experienced a rapid and sustainable growth that come almost effortlessly, this article isn’t for you.

For ecommerce businesses that are still struggling to make decent profits, read on.

Without further ado, let’s explore all seven components that will give you a clear roadmap to differentiate yourself and get to where you want to be:

#1: Choose the words you want to own in your niche

Who are you, and what are you about? Your potential customers need to know and understand this clearly. This is how you want your customers to experience your brand or find you.

Harnish suggests we all have one or two keywords that we own. His is growth. Google owns search. FedEx owns overnight delivery. For BMW, that’s a “driving experience.”

Snapchat created a new category of chat and cleverly named the venture after the two words the application now owns in the market’s minds.

If you focus on only one of the 7 Strata, this first one is the most important in driving revenue.

#2: Offer a unique brand promise

You need to think about your unique brand promise and then be good at keeping it. Start by answering those four questions:

1. Who/Where are your core customers?
2. What are you really selling them?
3. What are your three Brand Promises?
4. What methods do you use to measure whether you’re keeping those promises?

Harnish suggests you can start writing down 10-12 things that your marketplace wants from your business. Pick a maximum of three things that you’ll excel at. These become your brand promises.

Next, find who your customers are. Not everyone is the right customer for your company. Focus on the ones who get the most value from your offering.

The key idea behind this approach is you want to dominate profit share, rather than market share. If you pick a handful of customers from the market willing to pay your price (the margins), then you’ll own more profit share than your competitors.

What are you really selling to your customers: A mistake many companies make when describing What they sell is to focus on the benefits and features. All sales are emotional, initiated through the heart, and then justified logically by the head. Describe your products in a way that will make your customers want them.

What methods do you use to measure whether you’re keeping those promises?

A promise has no weight if you don’t keep it. If you don’t want to lose customers and get negative word-of-mouth publicity, you need to think about making your brand promises (values) measurable. It’s critical to measure them daily.

For example, if you offer the best price on the market, you should have a team that monitors your competitors’ pricing and makes changes fast to keep your promise.

#3: Brand Promise Guarantee

You need a brand promise guarantee for two distinct reasons: to keep your team laser-focused on keeping your promises and reducing customers’ fear of buying from you.

For Dominos, giving a free pizza is the guarantee behind their promise of pizza delivery in 30 minutes or less.

#4: Create a One-Phrase Strategy (Key to Making Money)

Can you state your strategy in a simple phrase or sentence? Think of it as the focus of the underlying activities that differentiate your company from your competition.

Here are a few.

Dell: Be Direct.
E-Bay: Focus on trading communities
IKEA: Flat pack furniture.
Apple: Closed architecture. Customers may get frustrated with Apple’s closed-architecture approach, but it allows them to charge premiums while Google and Microsoft are caught in the commodity trap.
Rackspace: It’s not about the servers, it’s about the support.
Walmart: Low prices, every day

These example companies have relentlessly focused on their one-phrase strategy, and this, they achieved significant growth and became leaders in their respective industries.

When you draft your one-phrase strategy, make sure that it captures your competitive value’s essence, and it is clear, concise, and memorable.

Once you nail it, you should communicate it through all your channels consistently and repeatedly.

#5: Outline Differentiating Activities (3 to 5 Hows)

According to Kevin Daum, author of ROAR, your competitors can use the same brand promises and guarantees as yours. Still, the real differentiation comes in the form of HOW you deliver on your promises.

“How” you run your business in a way that is different from the norms of your industry, help you be more profitable, and is nearly impossible for your competition to copy.

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Harnesh gives as an example Southwest Airlines. Their underlying strategy was “Wheels Up” – being in the air quicker and more often than their rivals. Their three brand promises to achieve this were low fares, more flights, and more fun.

That’s easy to be copied, right. But the real differentiation comes in their activities.

To achieve low fares, they abandoned the baggage fees that every other airline charges. Next, they used the same aircraft for all their flights, while other airlines run different planes. This way, they have the parts, maintenance, and pilots to get the aircraft off the ground as efficiently as possible.

Next, they chose to have a “no advance reservation” for seating. Passengers rush on the plane to get the best seats, and the result is in place: Southwest Airlines loads and unloads a plane 15 minutes faster than other airlines, which allows them to fit more flights in one day.

Lastly, Southwest Airlines operate on a point-to-point transit model instead of the common hub-and-spoke transit model. This way, they saved money on expensive infrastructure and reinforced their low-cost advantage in the marketplace.

#6: What is Your “X Factor”

Harnish believes long-term success can only come from developing a 7-10 times advantage over other competitors in your industry.

Schultz’s X factor (the founder of Starbucks) was charging prices several times higher than the norm. That gave him the capital to hit big and quickly open thousands of cafes across the country and multiply his extreme markups many times over.

So how do you figure out an X-Factor? According to Harnish states, you can start looking look for common industry bottlenecks that, if solved, could put your business in the driver’s seat. Usually, they could be a massive cost factor or an enormous time factor. The real challenge is that you’re often as blind as everyone else to the real problems that have been accepted as industry norms.

Next, begin looking for solutions that will give you an exponential competitive advantage (7-10x) for your industry. You may look outside of your industry. Use the power of analogous thinking to find solutions to critical industry problems that have already been solved by other sectors.

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Sometimes merely thinking about your industry from a different perspective is enough to help you find your X-Factor.

Barrett Ersek, the founder of lawn care company Happy Lawn faced a very challenging situation.

It typically takes five weeks in his industry to land a customer at an average cost of $350. Since his service costs $50/month, it would take him about seven months to break even on the sales and marketing costs.

So Barrett worked on reducing the time and cost of getting a customer. He found a way to reduce the time from five weeks to five minutes, which doubled his customers from servicing 6,000 to 12,000 lawns in about five weeks.

Barrett’s X-factor approach to acquire customers was so attractive, that he was able to sell his company for a huge profit.

#7. What X Factor is your Economic Driver?

Once you have figured out your X factor or underlying advantage, you can set up your business for massive scale.

To do so, you should define a single metric – your revenue (or cash flow or profit) per X that is aligned with your business model and long-term goal.

The question is what is the “x” factor that would provide the highest and most sustainable economic growth for your business? Is it revenue/customer, per product line, per project?

For Southwest Airlines it is revenue per plane. Their brand promise includes lots of flights, which turns their focuses on the number of planes in the air.

Once you understand how you best make money, you can align that process with your aggressive long term vision and be off to the races.

Crush your rivals

There is key difference between good and extraordinary businesses. The latter are backed up with a winning strategy that gives them a head start.

Finding your X-factor isn’t easy. It takes time and teamwork to put everything together, but it will pay off. Use all components of the 7 Strata of Strategy to guide you through the process. Once you find your competitive advantage, it’s just a matter of execution.

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Resource:
7 Strata of Strategy: Your Compass To Scale the Company by Verne Harnish
Scaling Up by Verne Harnish
X-Factor? What is that? by David Carter