Do you know what your business’ “secret sauce” is? Secret sauce is the differentiator that makes your organization better at something than another organization. It can be your people, your products, and the way you do things or a combination of all three. I really don’t know where the idea of secret sauce came from. Possibly it came from the old McDonalds commercial where they are literally singing the praises of the Big Mac hamburger and they mention “…special sauce, lettuce, cheese…”. Regardless of where it came from, the idea of, and the phrase secret sauce seems to be gaining traction in the business world.

Many organizations might say that their secret sauce is their technology. This may be true for brand new or green-field type products, but for most cases I don’t think that this holds true in the longer run. Let’s look at Apple for instance. They are an acknowledged leader in several product categories, but is their “technology” really better, or so different from any other company’s? I don’t think so.

I remember seeing a rare clip of an interview of both Steve Jobs and Bill Gates, where they were both on the same stage answering questions. Bill Gates was asked what he envied about Apple and Steve Jobs. His answer was very telling. He said he envied Steve Jobs “taste”. He said that Steve Jobs had a way of looking at things and creating an elegance about his products that set them apart.

I think he nailed what Apple’s secret sauce was in that one discussion. There are many MP3 players out there in the market, but none really as cool as the iPod. The same goes for the smart phone market and the iPhone. iPads and MacBooks have also been lauded for their designs, capabilities and functionalities. It is interesting that Apple had problems after Jobs left the first time then recovered and became the most valuable company in the world after he returned. Now that Jobs is gone there is a question about what is next at Apple, and what is next from Apple. It seems the start of the recent thirty five percent decline from the all time high price of Apple stock coincides pretty closely with the loss of the keeper of their secret sauce.

Understanding what your particular organization’s secret sauce is takes some significant and sometimes difficult self analysis. The question is not just what do you do well. It is also why you do it well and how you do it well.

By staying in the computing market we can see another example of this set of questions with Dell. Dell was one of the pioneers of supply chain management and mass customization production. They didn’t just build personal computers; they built you your personal computer. They did it as quickly and as cost effectively as the other PC manufacturers built their standard products. This capability was widely regarded as Dell’s secret sauce.

Unfortunately, it really wasn’t such a secret. Many companies are now using many of the ideas and principles that Dell initially pioneered and employed. There is now a question if Dell has grown too large to efficiently employ the same concepts and precepts that enabled their growth and success in the first place. There is a concern that many of Dell’s competitors are now better at the Dell model and process than Dell is. It seems that this sentiment is also reflected in Dells current stock price which is only half of its five year high price, and about twenty five percent of its all time high price.

Now Michael Dell has led a leveraged buyout of the company bearing his name, and is taking it back as a private company. It appears that he may believe that he too was a keeper of the secret sauce at Dell, like Jobs at Apple, and will now be able to rework his magic. I guess we will all see if that is indeed the case.

Instead of staying at the market – macro level, high technology type of secret sauce examples, I’ll relate one of my own. I was once involved in an organization that manufactured metal enclosures and integrated technology components into those enclosures. We didn’t make the technology components, just what was in essence the metal box that we put someone else’s components in. I’ll simplify what we did greatly by saying we bent and welded metal and turned screw drivers.

Initially the organization thought that they bent and welded metal and turned screwdrivers better than anyone else. They were sure that these types of production capabilities were their secret sauce and that they were their competitive advantage.

When we really looked at what our secret sauce was, it became apparent that we were not better at the physical production of the enclosure or the component integration. We had an enclosure design team that was able to design enclosures that did not require as much material or welding for their production that made us more cost efficient. The enclosures were designed to enable faster integration and more dense packing of the enclosed technology components. This meant it took fewer of our lower cost units to deliver the customers desired functionality than it took the competition. The design team also created superior heat exchange and dissipation capabilities that enabled the cooling of the smaller more densely packed enclosures.

It wasn’t our production capabilities that were our secret sauce as was widely thought. It was our design capabilities that were the secret sauce that enabled our production team to create a competitively advantaged product. Knowing our secret sauce enabled us to change the focus of our business. We no longer tried to out produce the competition. We focused on out designing them.

We changed our business approach from pursuing large volume opportunities where we would try and provide products based on an existing enclosure specification, to pursuing opportunities where we could generate and use our own competitively advantaged enclosure designs. It worked great. We were very successful.

I think it is pretty safe to say that most businesses like most hamburgers have the basics that are required to be successful. It is the looking for and understanding of their respective special sauces that will make them different. Understanding, protecting and leveraging each business’s secret sauce is what enables them to differentiate from the competition and be successful. The Big Mac still has its special sauce and it is still a successful product, but now other hamburgers now have their own special sauces as well, so its competitive advantage has been somewhat diminished. The same progression seems to occur with each business’s secret sauce. That would mean that new secret sauces, like new products need to be developed all the time to maintain an advantage.

It also means that regardless of how hard some businesses try, and despite what they want to believe, ketchup is not a secret sauce.