“Innovate where you differentiate” was the major message of a webinar lead by innovation expert and author Steve Shapiro, with his guest Scott McKain, a best-selling author and internationally recognized expert on business distinction. Structured as an open discussion between two top business consultants and their real-world experiences, they focused on proven strategies and practical steps on how to build irrefutable sources of differentiation for your business. Highlights:

Business growth is propelled by creating exceptional value for your customers. While innovation processes are necessary for business owners to keep up with a rapidly changing marketplace and are everyone’s responsibility at a firm, they warned that innovation for innovation’s sake is a waste of time and dangerous. You have to prioritize your energy and direct your experimentation into new ways to strengthen how you differentiate your business and services. This strategy directs you to the best use of your time, money and effort for the best return by attracting new customers and developing client loyalty -- succinctly, innovate where you differentiate. Your ultimate goal in innovation is to profitably create experiences so compelling to customers that they would never want to go anywhere else.

They gave an example of a home assurance industry client that stated its differentiation was in its “unique pricing models.” When asked how long after their introduction of a new pricing model did their competition copy them, the answer was a few weeks. It was pointed out that the firm was spending a lot of time and effort on pricing models as its differentiator, but gained only brief advantages. The firm's competitors ultimately benefited by rapidly copying its pricing models. The experts told the firm to innovate in areas where competitors would find it difficult to copy its strategies, such as building a unique network of subcontractor services focused on client needs.

Clarity precedes creativity. Knowing exactly how and where to differentiate can be difficult for many businesses. Shapiro and McKain cited a retail marketing magazine article that stated that 60 percent to 70 percent of small retailers can’t tell with certainty why clients buy from them. Mid-size to larger companies may have a lack of alignment or agreement between departments and key managers. Part of the problem for retailers is not just determining who they are, but also who they are not. Starbucks' foray into music was cited as an unsuccessful distraction. If you cannot define your differentiation internally, you cannot deliver it externally. You need clarity to deliver differentiation in an exceptional fashion.

Shapiro and McKain discussed exercises that can help a company better determine and build on its differentiation. Ask: What does your product or service make possible in the lives of your clients? How do you deliver on your stated differentiation? How would a company most successfully compete with you?  Why are you not doing some of those things a competitor is doing?

Unrelenting client focus. The experts stated that it is easier to see what your strengths are by taking an outside perspective. Keep focus by defining what is critical for your customers in the area in which you work with them. An example was brought up that Amazon requires an empty chair at all meetings to represent and remind all participants to relate all discussions to how they would impact their clients. Remember that your customers ultimately determine what your differentiation is, not you.

Building wells versus fences. A great illustration of how to focus on your customers was given in a story related by an Australian executive who was raised as a rancher. He learned that when you dig a deep well providing access to cool water, the cattle stay close to those wells and expensive fencing isn't needed to keep them from wandering away, resulting in substantial cost savings and easier management. He applied that learning to running his company, where he instructs his team to spend more time building wells than building fences. They have no need for punitive retention strategies because all their time is spent on continuously building exceptional client experiences that will keep clients close to the firm.

USAA case study. Shapiro said he did a case study of USAA, a firm that is a prime example of one that innovates where it differentiates. USAA clearly focuses its financial services offerings on military personnel and their families. USAA has been constantly innovating on how to make the lives of its customers better by studying their customers’ lives and needs. Besides quality financial service offerings, USAA created the deposit-check-by-mobile-phone feature that responded to the transient nature of the jobs of military personnel. USAA also offers grief counselors and established a foundation to support members returning from their tours of duty. The constant innovations from the company, directed specifically to their clients' lives, has resulted in a 98 percent retention rate and 90 percent of their customers say they will stay with the company “for the rest of their lives.” USAA’s customers are passionate about the company.

Expertise is the enemy of innovation. Both speakers warned that many top executives base their decisions on 30 years of experience in one industry, on what has “happened.” The problem is that they may develop blind spots and can get trapped in their own perspective versus delivering new breakthrough ideas and sustainable ongoing innovation. Many times, they need fresh eyes and would benefit highly from bringing in ideas and perspectives from outside the firm and industry.

Beware best practices. Steve Shapiro, author of Best Practices are Stupid, is clearly not a fan of industry-specific best practices. “Replication is not innovation” and someone else’s practice is not necessarily applicable for you and your business or area of operation. You also cannot export some best practices without having the same cultural or dispositional nature to be able to fully implement the practice in the same way. Most important, you are not working to deliver the unique leadership and value proposition you could be providing your customers.