Management
Abstract
Conformity and differentiation are strategic tools that businesses utilize in order to gain advantage in the competition. However, institutional theory, including the resource-based literature opposes the existing view about differentiation. The trade-off in many industries suggests that extreme differentiation and conformity appears to damage performance while moderate differentiation creates an opposite effect. This discussion will explore the context of conformity and differentiation from related theories and evaluate the statement, whether the trade-off could provide a better advantage for the any industry.
Introduction
The context of differentiation and conformity refers to how an organization or business establishes its identity. Every aspect of the business, its objectives, mission, and vision reflects the organization’s identity and at the same time, it also reflects the confluence of the two contradicting tendencies. First, is how will the business conform to the norms of the wider business environment. Secondly, why the business differentiate its identity from the rest of the competition.
The question of how and why is the challenge that every business will have to undertake. There are existing literatures that notably address the question of how and why, but not have been able to integrate in a productive manner (Simmel, 1957). Among the notable approaches in advancing the understanding of the two concepts (differentiation and conformity) can be observed in the principles of “optimal distinctiveness” theory (Chan, Berger, and Boven, 2012).
The theory suggests that human beings do have the need for inclusion and assimilation, which competes with the need for uniqueness and differentiation from the rest of the crowd. On the other hand, an optimal balance is necessary in order to attain an effective insinuation of identity. In relation to institutional theory, the opposing view about differentiation suggests that moderation is imperative in improving performance while the extremes appear to constitute damage to performance.
The balancing approach for optimal distinctiveness is often associated with the integration of conformity, but it is important to consider as well that the dominance of the latter encompasses inferiority on performance. The discussion critically analyzes and evaluates the given statement by exploring the context of conformity and differentiation. More importantly, an optimal approach will be recommended based on the outcome of the analysis.
Differentiation and Conformity in Theory
Understanding the contradicting nature of conformity and differentiation requires a clear understanding of its underlying principles. Conformity according to theory, is an intrinsic utility derived from consumption (Bernheim, 1994). To emphasize its meaning, individual status is assumed to have a strong correlation with public perception rather and individual predisposition rather than the individual’s actions (Berhnheim, 1994). The problem with predisposition is its unobservable characteristic. On the other hand, understanding, one’s predispositions can be observed through actions, which in effect reflects status. In connection with institutional theory, the principles of conformity suggest that organizations tend to adapt into the norms of its environment, particularly when status is the valuable gain in the bargain (Ghazzai, 2012). On the other hand, depending on conformity alone limits the opportunity for the business to explore its other strengths and most importantly in establishing organizational identity. This is when the concept of differentiation comes into play in terms of creating the contrast against conformity.
The concept of differentiation was drawn from the principles of Sociology and Anthropology. Together, the two disciplines form the cornerstone of the human social organization, its structure, and processes (Buzan and Albert, 2010). On the other hand, innate capacities and the view of one’s self, value create the sense of identity, which is factored that limits his adherence to social conformity. Based on this principle, the context of differentiation was adopted in the business environment as a strategy to separate an organization’s identity from the rest of the competition. Primarily, differentiation is about exploring the properties of a function by finding the derivatives (Tarr et al., 2013). From a business perspective, exploring the function by finding the derivatives means that the business should explore its qualities that set them apart from the rest and use it to create an advantage that is unique in the competition.
Strong Conformity in Perspective
Conformity in the business environment takes various forms. It could be in a form of strict compliance to the industry standards. It could also come in a form of following a particular trend in the industry (Kollar Market Analytics Inc., 2005). For example, a ship building company is expected to comply with the industry standards of building ships due to adherence to safety, functionality, efficiency, and cost. In terms of trend following, for instance, the latest trend in mobile and connected is the frequent use of smartphones to access Internet. Hence, to leverage on the growing trend, telecommunication companies could offer their subscribers with free use of signal-based data connection to attract more customers. There are other more forms of conformity in the business environment, but there is an apparent consequence of having a strong dependence on conformity. In all respects, conformity in business requires a balancing feat in order to maintain market advantage and not to hurt the chances of exploring the differentiated possibilities for the business.
One of the reasons why too much conformity hurts performance is that strict adherence to the norms impedes the exploration of more sustainable and effective probabilities (Bocchario and Zamperini, N.D.). In all aspects of the business, be it the employee’s work performance or sales performance conformity has an impact towards productivity, growth and development, and opportunities. For example, a company imposing a strict compliance towards how the employees should perform their job hampers the chance for the employees to utilize their personal strength and talent that can be beneficial for the company. In terms of company performance, conformity limits the opportunities for growth. For instance, the company manufacturing mobile phones could choose to conform to the trend in mobile technology, but that also limits the opportunity for them to develop their own technology to improve products.
Moderate Differentiation in Perspective
It was mentioned earlier that differentiation allows an organization to leverage on their strengths in order to create strategic advantage in the competition. On the other hand, several literatures express opposing views on the value of differentiation. The reason is that differentiation undermines conformity and such deviation results to market fragmentation. However, differentiation can be effective, particularly in increasing the business’s performance provided it is being done in moderation. Uniqueness is one of the qualities that set the boundary between an organization and its competition. For instance, Apple Inc. was able to get back on its feet after long years of dormancy in the tech industry, but the introduction of iPod catapulted the company to its current success (Johnson et al., 2012). The product itself has created the differentiation strategy for Apple by having larger storage, better design, and having iTunes as its central multimedia function.
The question of how iPod turned out to be a massive success? The product has one specific intangible quality that sets it apart from the other similar products and one of them is the perfect balance between differentiation and conformity. The growing trend in digital media has revolutionized the way people consume media. Music in its digital form became widely available and the tech industry is conforming to this trend. Apple Inc. took the same opportunity by creating the iPod. The product conforms to current trends in digital media consumption and more and more consumers are asking for devices that enable them to enjoy multimedia content in a compact device. Despite the conformity, Apple chose to be different in terms of technology and design, which became the start of its upward spiral development. Hence, the moderation in differentiation creates an advantage in which a company would be able to highlight its product’s strength and at the same time conform to the emerging trends and consumer demands.
Extreme Differentiation in Perspective 1 page
In contrast, to moderate differentiation, taking the extremes does more damage to business than the anticipated advantages. Deviating too much from the norms creates critical risks for the business. For instance, Blockbuster Video is a multimedia retail business that for many years had dominated the video rental industry (Baskin, 2013). At some point during its peak, Blockbuster was able to close the gap between the consumers and videocassette price by introducing a rental scheme. The consumers do not need to buy a copy of their favorite movie for a hefty price because they could just rent it out from the store and the cost of one VC is enough to rent a full day of movie marathon. Everything has changed for the company as the popularity of the digital media broke the streaks of Blockbuster’s success. On the other hand, the company remained resistant about conforming to the massive change in consumer behavior. The business has gone downward spiral since the availability of the movies through the Internet changed the way multimedia are consumed, from rentals to sometimes free to download.
What went wrong for Blockbuster is simple, the company insisted to continue with its traditional business model and deviated too much from, the possibilities that the digital media have created, in so many ways the company demonstrated extreme differentiation. Taking from the Blockbuster Video example, it appears that extreme differentiation takes away the organization’s capabilities to see the possibilities on the horizon. Resistance to change is the right word to describe the extreme differentiation. Deviating too much from the norms casts the organization away from the market spotlight. The struggle to keep up with the competition is no longer a solution because differentiating in extreme manner tends to undermine the consumers’ true demands. In effect, the extremes slows down the growth of the business and eventually kicks them out of the competition like a weirdo being kicked out of the soccer practice.
Analysis
Looking back at the discussion on the theoretical context of conformity and differentiation, there are three things that are certain. First, conformity is an integral part of the business where adherence to industry standards, policies, market trend, consumer behavior, and legitimacy is necessary. On the contrary, strong conformity leads to inferior performance where too much dependency on the aforementioned aspects limits the firm’s opportunity to stand out in the competition (Brown, 2012). One of the ways that the firm can continue to conform to the norms is to utilize trade-off in a form of innovation. Although innovation is compulsory for the business to progress, it is important to consider that the purpose of innovative practices should not be limited as a trade-off. The second important realization from the discussion is that differentiation creates opportunities for success where competitive advantage can disrupt the incumbencies in the industry (Tan, Shao, and Li, 2013).
Apparently, taking differentiation into extremes puts the business at risk of being too far from the core objectives of the industry and competition. Extreme differentiation takes away the legitimacy factor of the firm. Furthermore, implementing extreme differentiation is costly for the business because the strategy will require the company immense amount of time, effort, and money in order to stabilize the image that the company is trying to establish. Within the time frame in which the company is trying to establish its highly differentiated strategy, there is a strong possibility that the business will face different risks because they have to work really hard to change the customer’s preferences. Nonconformity is can be beneficial if it was done in perfect timing and in moderation. In addition, veering away from the norms encompasses a need for innovation that creates the most impact in order to consider success of the differentiation strategy, take Facebook as a perfect example (Belleza, Gino, and Keinan, 2014).
Lastly, on the realization from the discussion, conformity and differentiation works hand in hand if done accordingly and aligned with the changing dynamics of the industry. Therefore, not only that differentiation should be taken in moderation, but also in conformity. In moderation, differentiation strategy creates distinctive attributes that will set the business apart from the competition. One of the positive aspects of moderate differentiation is that the firm would still be able to comply with the industry and market demand for legitimacy while keeping maintaining the firm’s unique identity. For instance, the company would be able to charge for premium on their product. Take for example, Apple Inc., in all respects; the company has demonstrated the epitome of successful differentiation. To compare, the company puts a premium price tag for its products that at some extent is similar to products offered by other brands. Even if Apple conforms to the demand for high quality electronic devices, the products are incomparable to the other similar devices.
For example, a MacBook versus a high-end laptop from other manufacturers are just about the same product, but what sets the former from the latter? The answer is the differentiated qualities of MacBook such as having a well-developed operating system that is unique to the product. In addition, the minimalist design stands out as a visualization of its value, notwithstanding the components of the product that Apple has developed. Therefore, the company sets an example of the balance between conformity and differentiation. There was conformity in terms of adhering to the consumer demand for quality electronics, but at the same time, there were stand out qualities that are unique to the products, which encompasses success in differentiating. The same strategy may not be ideal for every business because maintaining differentiation for an indefinite span of time is costly and poses risks if the consumers did not fully embraced the implemented differentiation.
Conclusion
Conformity and differentiation require balancing, as the extremes on either side would cause the business to lose performance. The opposing views about differentiation are associated with the consequences in which the differentiating firm can potentially disrupt the conventions of the incumbencies in the industry. On the other hand, the apparent trade-off between differentiation and conformity depends on the attributes developed by the firm to establish a strong identity.
Strong conformity leads to weaker performance because strategic efforts limited to what the industry, the competition, and the market dictate limits the capacity to create its own advantage. In addition, there would be limitations on the firm’s progress in terms of developing more competitive products and services, thus the opportunity to lead the competition is difficult. Inferiority in performance is one of the negative implications of strong conformity, which for businesses is a critical risk affecting the bottom line.
In terms of extreme differentiation, it also impacts the business synonymous to the effect of too much conformity. It also damages performance in several ways in which too much differentiation may lead to the competition imitating the same strategy created by the firm. Furthermore, the extreme differentiation puts the business at risk of being rejected by the market where the consumers lost interest of the brand because it deviated too much on what the consumers are demanding. As a result, the business loses its legitimacy, thus leaving them at the bottom of the competition.
Recommendations
Assessing the value of differentiation and conformity in the business brings the discussion to provide recommendations on how businesses would be able to adopt its principles. The first thing to consider is the advantage and the disadvantages of either strategy. It was mentioned that too much conformity and too much differentiation would hamper the progress of the organization in terms of performance. Therefore, it is recommended that business organizations should create an optimal balance of the two strategies where conformity should be maintained within the objectives of adhering to the prescribed standards, procedures, policies, industry trends, and customer demands. On the contrary, entrepreneurs should also maintain the initiative of creating value in their products and services through differentiation. One of the ways that companies can gain advantage of the competition is to consistently invest in innovation and developing new strategies.
In terms of future development in the institutional theoretical discourse, there is still so much room for improving the understanding of conformity and differentiation in a larger spectrum of business application. The current literatures pertaining to the concept of conformity and differentiation still requires further exploration in terms expanding the underlying principles in relation to business performance. This is because currently, only few literatures are available that addresses the relationship of conformity and differentiation to industry performance.
List of References
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