Superior products and services confer only a fleeting advantage

Global competition has created an endless cycle of innovation and imitation among companies striving to differentiate themselves from their competitors. Increasingly, the traditional sources of differentiation, such as product uniqueness, are not sustainable enough to create sufficient competitive advantage. So some of the most successful companies today are using behavior to differentiate themselves in their markets. Behavioral differentiation is more difficult to copy, even when competitors know what you are doing, because differentiating yourself behaviorally requires more skill and will than many companies have. Herb Kelleher at Southwest Airlines, Horst Schultze at Ritz‐Carlton, George Zimmer at Men’s Wearhouse, and Sam Walton at Wal‐Mart understood that they could attract and retain customers by creating significantly positive experiences – and it starts with treating their own employees well. These business leaders succeeded in part because they understood the powerful effect their employees’ behavior has on customers’ experiences with their companies. Positive behavior is attractive. Behavior that is significantly negative also differentiates, but it has a repulsive effect on customers. Three forces drive behavioral differentiation: leadership, culture, and processes. Companies that excel at behavioral differentiation, including Harley‐Davidson and Xilinx, have leaders who set a powerful behavioral example and understand the role behavior plays in business strategy. These companies also have strong cultures of differentiated treatment toward employees as well as customers. Finally, they have processes in place that help them operationalize superior behavior. Behavioral differentiation offers a significant advantage to companies whose products and services have become commoditized in today’s tough markets.