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art of differentiation

Wayne Gretzky and The Art of Differentiation

by Jay Clifford, Vice President

Global Investment Strategies

Wayne Gretzky is arguably the greatest hockey player of all time. Definitely in the top three. After his playing days Gretzky transferred his skills to the business world and is achieving great success in that arena as well.

One of Gretzky’s great skills as a player was anticipation. He could anticipate things as they unfolded and be in the right place on the ice before his opponents even knew where he was going.  As Gretzky said:

“A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be. I skate to where the puck is going to be, not to where it has been.”

Anticipation in business is essential, especially if you want clients to see you as different from your competition. Think about it. In most competitive situations salespeople and their organizations are reactive. A client needs something. Companies compete to provide the solution. The solutions themselves are usually not unique.

Most companies are me too businesses. When you get down to it, one organization’s products and services are not all that different than another organization’s products and services. And if there is a difference, competitors will soon copy it in order to bring things back into balance.

Now, think about the following phrase – We are the only company that ________.  Fill in the blank. What would you put there? What would you put there where clients would readily agree with it?

Here at Global Investment Strategies we go through this exercise on a regular basis. I can say without reservation that completing the sentence is a tough thing to do. Anticipation though, when applied to thinking about clients, enables a company to be where the client will be, not where they are right now. This opens the door to effectively completing the blank. Let me give you an example.

A client is very successful and growing.  Current ownership is second generation, and they changed the company to an ESOP (Employee Stock Ownership Program) about 15 years ago. 

One aspect of an ESOP often overlooked is the stock repurchase obligation.  An ESOP is a qualified retirement plan for participating employees.  When they retire or have to leave for some other reason (usually health related), the ESOP is required to repurchase the shares they have accumulated and vested.

Our client’s success led to considerable growth and increased participation in the ESOP.  Generating enough liquidity to repurchase shares was challenging in the present and would become impossible in the not too distant future.

Our solution – combining the best of the investment banking world with the best of the life insurance world.  We structured a program where the company acquired a life insurance solution for no cash, and the policy covered the repurchase obligations ad infinitum when fully matured.

The bottom line – a potential $250M liability over the next ten years was covered, and liquidity generated by the business was available to the leadership team to use at their discretion.

This differentiated advantage won’t last forever. It will have to evolve as clients change and competitors copy. That’s okay. With this client at this moment in time we broke the code. We focused on the one thing that competitors cannot copy – a strong relationship with the client.

Our client relationships take precedence over everything else. The relationships are close.  To coin a phrase, they are “business intimate” relationships. Because of these close relationships, we are able to listen well and anticipate. We anticipated where the client was going to need to be, before they even knew it, and developed a solution that was unique to them.