Scaling Up Blog

The X-Factor: Find Your Company’s 10x Competitive Advantage

Date: February 1, 2020 Author(s): Rob Monson

In the movie The Founder, two remarkable discoveries occur that shape the fast food industry for years to come. The original founders, the McDonald brothers, and the subsequent founder, Ray Kroc, each had epiphanies that drove their success.  Within a very short period of time, each found an “X-Factor” that gave McDonald’s a massive competitive advantage over the competition.


Described in his book Scaling Up and in his Fortune article titled “The X-Factor”, Verne Harnish describes the X-Factor as the 10-100x competitive advantage that organizations gain by solving an industry bottleneck or revolutionizing the marketplace with a new way to create customer value or conduct business.


The McDonald Brothers Redefine the Drive-In Dining Experience


In the first clip from The Founder, one of the McDonald brothers state that their goal is to reduce the drive-in dining experience from an order being ready in 30 minutes down to a nearly-unbelievable 30 seconds. This push for innovation solves a long-standing restaurant industry bottleneck and fundamentally creates “fast food”, the rapid production process that has formed the backbone of chain restaurants for decades.


This was not merely an example of “lean”, as the YouTuber posting this clip underwhelming declares in the video title. I’m a big fan of lean, but mislabeling this achievement as equivalent to mere process improvement is an insult to innovators and entrepreneurs everywhere. This was a change, a magnitude shift, that would alter an entire industry despite some early adoption hurdles shown in the last minute of the clip. This was the McDonald brothers finding an X-Factor that would re-shape how the world perceived the speed, quality, and value of the drive-up dining experience.

The Founder: McDonald Brothers Find their X-Factor

What I love about this is that their X-Factor begins with a simple idea, a solution to something they dislike about their entire industry. From there, they rigorously work the problem until it becomes feasible. Hours are spent designing the perfect kitchen, where productivity and efficiency are paramount.


This is how the X-Factor works: You may discover yours in minutes, hours, days, or months. But, it’s the planning, preparation, testing, and implementation that sets you apart. Be prepared to put extra effort into finding and creating your X-Factor. I will discuss how to find the X-Factor shortly.


The second clip shows how Harry Sonneborn figures out that Kroc is looking at the world incorrectly (inefficiently) by assuming he’s in the fast food business. To maximize capital and fuel expansion, Sonneborn suggests that Kroc needs to be in the real estate business, purchasing land and leasing it to franchisees. This concept fast-tracks the chain’s growth, helping it to become a worldwide phenomenon before other competitors could even get out of the starting gate.


What stands out to me about The Founder is not whether the McDonald Brothers or Kroc played the role of the protagonist or the antagonist. It is that these purpose-driven, connected individuals created not one, but two, X-Factors that revolutionized the fast food industry in the span of about three years. This should make business owners and CEOs hopeful that they can do the same.


How to Find Your X-Factor


Find the bottleneck in your industry. Verne Harnish states that the first and easiest way to find your X-Factor is to look for common industry bottlenecks that, if solved, could put your business in the driver’s seat. These bottlenecks are things you or your consumers generally hate about your industry and center around the three factors we all balance: Time, quality, and cost. Harnish offers a great suggestion on how to find these challenges: Look at the breakout session content from your last few industry tradeshows and find patterns. You will likely find that you and your competitors are all faced with similar problems, that, if solved, couldhelp you dominate your market.

The Founder: Harry Sonneborn Finds Ray Kroc's X-Factor

Look outside of your industry for solutions. While Sonneford’s experience was within the restaurant industry (he was once VP of Finances at Tastee-Freez), don’t be constrained by your own ideas or the limitations of your industry. In this HBR article, the authors discuss the power of analogous fields to find solutions to critical industry problems. The key is to look for industries, perhaps more advanced than your own, that have faced and overcome similar issues. Using the methods outlined in the article, you can – and should – align yourself with experts outside of your industry. Other industries’ creative solutions to problems can turn into your company’s X-Factor.


Discover the one thing that will put your industry out of business and become it. Sometimes merely thinking about your industry differently is enough to help you find your X-Factor. Are CEOs truly taking the time to look beyond the here and now to see 2-5 years down the road? At the rate all industries are changing, I estimate that any existing business model has roughly a four-year life cycle before it’s completely replaced by something better and more efficient. If that’s even remotely true, it means we’re all on the clock. Ask yourself which one or two things will destroy your existing business model. Then, actively work to become what will make your business – and your industry – obsolete. This will help you gain market share with customers who are looking for an easier way to access your industry’s product and services.


Start with Your Strategy Council


The strategy council is the 3-5 people on your leadership team who help guide the company. This typically includes the heads of marketing, sales, product, and finance. CEOs should use this team to think about the X-Factor using the criteria listed above (solving industry bottlenecks, seeking help from other industries, and becoming the one thing that will put your industry out of business). The X-Factor (seeking it, planning for it, and executing it) should be discussed in your weekly strategy council meetings.


Once you’ve found your X-Factor, keep it under wraps. It’s only a matter of time before competitors discover it and try to copy it. By then, you’ll already be working on your next X-Factor. This is the essence of good strategy: Continually finding unique, compelling ways to make what you and rest of your industry currently do obsolete in such a way that you gain a 10-100x competitive advantage.  Your business’s longevity depends on it.


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