The Three Levels of Business Strategy – Better, Different, and Contrarian

Successful businesses use a solid strategy to determine their goals and how to achieve them. However, not all strategies are created equal. This article explores the three levels of business strategy: Better, Different, and Contrarian.

We’ll analyse the strengths and weaknesses of each approach, provide real-world examples of businesses operating at each level, and offer insights on how to evolve your strategy from “better” to “contrarian”. By understanding these levels, you’ll be better equipped to position your business for long-term success in an increasingly competitive marketplace.

Background 📝

The concept of business strategy has evolved significantly over the years. In the past, simply being “better” than competitors was often enough to secure market share. However, as markets have become more saturated and consumer expectations have risen, businesses have had to find new ways to stand out. This evolution has led to the emergence of “different” and “contrarian” strategies, which seek to create unique value propositions and challenge industry norms.

Core Concept – The Three Levels of Business Strategy 🗺️

Definition and Key Aspects

The three levels of business strategy represent a progression in strategic thinking –

1. Better: Focusing on outperforming competitors within established industry norms.
2. Different: Creating a unique value proposition that sets the business apart.
3. Contrarian: Challenging industry assumptions and norms to create new market spaces.

Fundamental Principles

• Each level builds on the previous one, increasing in complexity and potential impact.
• Moving up the levels typically requires more innovation and risk-taking.
• Higher levels often lead to more sustainable competitive advantages.

Relevant Examples

• Better: A fast-food chain offering quicker service than competitors.
• Different: A fast-food chain focusing on organic, locally sourced ingredients.
• Contrarian: A “fast-food” chain that prioritises slow, mindful eating experiences.

Component Breakdown – Analysing Each Strategic Level 🔍

Better Strategies

Better strategies focus on outperforming competitors within established industry parameters. This often involves improvements in quality, efficiency, or customer service.

Strengths:

• Easier to implement and understand
• Clear benchmarks for success (competitor performance)
• Lower risk, as the market demand is already established

Weaknesses:

• Easily copied by competitors
• Can lead to price wars and reduced profitability
• Limited potential for significant market disruption

Different Strategies

Different strategies aim to create unique value propositions that set the business apart from competitors. This often involves targeting underserved market segments or combining existing offerings in novel ways.

Strengths:

• Creates stronger brand differentiation
• Can command premium prices
• More difficult for competitors to copy quickly

Weaknesses:

• Requires more market research and innovation
• Higher risk of misalignment with market demands
• May limit the potential market size

Contrarian Strategies

Contrarian strategies challenge fundamental industry assumptions and norms. These strategies often create entirely new market categories or radically reshape existing ones.

Strengths:

• Potential for significant market disruption and growth
• Can establish the business as an industry leader
• Often leads to strong brand loyalty and customer advocacy

Weaknesses:

• Highest risk of failure due to untested assumptions
• Requires significant resources and commitment
• May face resistance from established industry players and conservative customers

Practical Application – Real-World Examples at Each Level 🛠

Better Strategy Example – Domino’s Pizza

Domino’s focused on being “better” by improving delivery speed and tracking. They invested heavily in technology to streamline ordering and delivery processes, aiming to outperform competitors on convenience and reliability.

Different Strategy Example – Airbnb

Airbnb created a “different” strategy by enabling homeowners to rent out their spaces to travellers. This unique approach provided a new type of accommodation option, setting Airbnb apart from traditional hotels and rental services.

Contrarian Strategy Example – Tesla

Tesla adopted a contrarian strategy in the automotive industry by focusing exclusively on electric vehicles when most manufacturers saw them as niche products. They also challenged distribution norms by selling directly to consumers rather than through dealerships.

Advantages and Challenges of Evolving Your Strategy 📈

Key Advantages

• Increased potential for market leadership and profitability
• Greater resilience to competitive pressures
• Enhanced ability to attract and retain customers and talent

Potential Challenges

• Higher risk of failure as strategies become more innovative
• Increased resource requirements (financial, human, technological)
• Potential resistance from stakeholders comfortable with the status quo

Strategies to Overcome Challenges

• Implement robust market research and testing processes
• Develop a culture of innovation and risk-taking within the organisation
• Engage stakeholders early and often to build buy-in for strategic shifts

Comparative Analysis – Impact of Different Strategic Levels 🔍

Better Strategies

• Often lead to incremental improvements and short-term gains
• Can result in a “race to the bottom” in highly competitive industries
• May be sufficient in less saturated or slower-moving markets

Different Strategies

• Create more sustainable competitive advantages
• Allow for premium pricing and higher profit margins
• Can lead to the creation of new market segments or niches

Contrarian Strategies

• Have the potential to reshape entire industries
• Often result in the strongest brand loyalty and market position
• Can lead to exponential rather than linear growth

Future Outlook – The Evolution of Business Strategy 👓

Emerging Trends

• Increasing importance of sustainability and social responsibility in strategy formulation
• Growing role of data and AI in identifying strategic opportunities
• Rise of ecosystem strategies that extend beyond traditional industry boundaries

Predictions for Future Growth

• Shift towards more agile and adaptive strategic approaches
• Increased focus on customer co-creation in strategy development
• Growing importance of platform and network effect strategies

Potential Impact on Industry

• Acceleration of industry convergence and blurring of traditional boundaries
• Increased volatility and disruption across various sectors
• Greater emphasis on innovation and continuous strategic evolution

How to Evolve Your Strategy 🚀

Step 1 – Assess Your Current Position

Begin by honestly evaluating your current strategic level. Are you competing primarily on being “better”, or have you started to differentiate your offerings?

Step 2 – Identify Market Gaps and Customer Pain Points

Look for unmet needs or frustrations in your industry. These can be springboards for “different” or “contrarian” strategies.

Step 3 – Challenge Industry Assumptions

Question the fundamental “rules” of your industry. What if the opposite were true? This mindset can lead to contrarian insights.

Step 4 – Develop Multiple Strategic Options

Don’t settle for the first idea. Develop several strategic options at different levels to compare and evaluate.

Step 5 – Test and Iterate

Start with small-scale tests of your new strategy. Use the results to refine your approach before full implementation.

Step 6 – Build Organisational Capability

Evolving your strategy often requires new skills and mindsets. Invest in developing your team’s capabilities to support the new direction.

Step 7 – Communicate and Align

Ensure all stakeholders understand and support the new strategic direction. Alignment is crucial for successful implementation.

Closing Thoughts 💭

The journey from “better” to “contrarian” strategies is not an easy one, but it offers immense potential for businesses willing to take the leap. By understanding the strengths and weaknesses of each strategic level, and learning from real-world examples, you can begin to evolve your own strategic thinking. Remember, the goal is not necessarily to always be contrarian, but to find the right strategic level that allows your business to create unique value and thrive in its market context. As you move up the strategic levels, you’ll likely face greater challenges, but also greater opportunities for significant impact and growth.

In an increasingly complex and fast-paced business environment, the ability to think strategically at all three levels – better, different, and contrarian – will be a crucial skill for leaders and organisations. By mastering this skill, you’ll be better positioned to navigate uncertainties, seize opportunities, and create lasting value for your customers and stakeholders.

If you found this article insightful, we encourage you to explore our learning centre for more content on business strategy and innovation. Are you ready to take your business strategy to the next level? Reach out to us at Intuji – we’re here to help you navigate the complexities of strategic evolution and find your unique path to market leadership.