Sunday, February 4, 2007

Strategy is Like Barbecue Sauce

If you want to start a lively discussion among certain people in the United States, ask them what the best flavor of barbeque sauce is. It is a subject where it is nearly impossible to get an agreement.

There is a reason why supermarkets carry a wide variety of barbeque sauces. Some people like their barbecue sauce hot; some like it sweet; some like it sour; some like it thick; some like it thin; some like it smokey flavored; some like it to taste more like onions; and so on. There is no single flavor to please all, so the supermarket carries a wide variety.

If you were told you were limited to making only one flavor of barbecue sauce, what would you do? You would be faced with three choices. Your first choice would be to try to create a flavor that is an average of all of the flavors—not quite hot; not quite mild; not quite sweet; not quite sour; and so on. This average would probably be unsuccessful because most people do not want an average of all flavors.

An average blended flavor would always be inferior to any extreme-flavored alternative. If you like your barbecue sauce hot, there would always be a hotter alternative. If you like your sauce sweet, there would always be a sweeter alternative. Although the blended average might end up being the least hated alternative, it would almost never be the most favored flavor.

The second option would be to try to be the sum of all flavors—to be the hottest, sweetest, tartest, mildest, thickest, thinnest, and so on, all at once. Besides the fact that you could never excel in all directions (i.e., you cannot be both the thickest and the thinnest at the same time), not everyone wants all of the flavors at once.

What if I like my barbeque sauce hot, but I do not want it to be sweet? With option number two, I have no choice—I get all of the flavors or I get nothing. It would be like mixing all of the pigments of paint together. Instead of ending up with a rainbow of colors, you end up with a grayish mud-like color. It would be undesirable to almost everyone—another likely failure.

The third choice is to just pick one flavor and get known for doing it in a way that is better than the others producing the same flavor. Although not everyone will like your flavor, at least you will have more satisfied customers than if you picked one of the first two options. A small segment of loyal and satisfied customers who are willing to buy your flavor, even if most hate it, is typically superior to having a flavor that may not be the most hated, but is not especially liked by anyone.

Choosing a barbeque sauce is a lot like choosing the right strategy for your company. The particular barbeque flavor you select would be similar to the particular strategic position you communicate to the marketplace.

Strategic positioning is the process of determining what you will stand for in the minds of your customers. For example, Wal-Mart’s strategic positioning revolves around offering lower prices than its competition. Everything it does reinforces its ability to sell at the lowest overall prices in its trade area. Walt Disney’s strategic position centers on providing superior family entertainment. The company works very hard ensuring that it creates more happiness and fun for families than anyone else.

Just as the barbeque sauce manufacturer can choose from a variety of flavor options, a company has a variety of positioning options. For example, Wal-Mart did not have to choose a position based on price. There are plenty of other successful retailers that have chosen other strategic positions, such as service (Nordstroms, Harrods), convenience (7-Eleven), emotional feelings (Victoria’s Secret), selection (Home Depot), and so on.

Similarly, there are many successful entertainment companies that have chosen a position other than the family fun position of Walt Disney. Of course, there are a number of companies in retailing and entertainment that have chosen the wrong position and have failed. Therefore, a choice must be made. It’s an important decision. If you choose the wrong position for your company, you may find yourself stuck with a strategic position nobody wants or one that you cannot win.

There are three major principles of strategic positioning we can learn from the story of the barbeque sauce:

1. Strategy is not about trying to please everybody…it is about making choices.
As we saw in the story above, when you try to design a barbeque sauce to please everybody, you end up with a sauce that pleases practically nobody. Whether it’s a flavor that is the average of all flavors or one that is the sum of all flavors, it will never taste as good to an individual as a sauce specifically designed for his or her favorite flavor segment.

With rare exception, companies that try to position themselves as perfect for everybody, usually end up being ideal for nobody. Strategy is about making hard choices. Choosing a particular position means that you are rejecting other positions. You have to decide:

Who am I targeting my products or services to (and who am I not targeting)?
What is the key attribute blend that is most important in my value proposition? Does it emphasize Price? Service? Quality? Speed? Which attributes will not be emphasized?

It is okay to reject certain positions, as long as you choose a different position and excel in being the best at owning that position.

2. Strategy is not about being the best at everything…it is about making trade-offs.
There are three reasons why a company should not try to position itself as being the best at everything. First, it takes a tremendous amount of resources to be the best at everything. Most companies cannot afford to outperform all other competition on every attribute.

Second, even if you could afford it, you customers may not give you credit for it. It would be difficult, for example, to convince a customer that you have the best prices and the best service and the most features all at the same time. Because it is difficult for them to believe that it is possible for any company to excel in all three areas, they may conclude that you excel in none of them. It is better to get credit for doing one thing very well than to confuse a customer by claiming too many positions and ending up not owning any.

The third reason why a company should not try to position itself as the best at everything is because attributes tend to cancel each other out. Just as you cannot be both the hottest barbeque sauce and the mildest sauce at the same time, you cannot be the everyday brand for the common man and the exclusive brand for wealthy snobs at the same time. They cancel each other out and you end up representing neither well. It is better to pick one and do it well.

Strategy is all about making trade-offs. You trade away your ability to do certain things well so that you are better able to do other things well and get your customers to recognize it.

3. Strategy is not about seeking similarities…it is about creating differences.
I have seen numerous examples of companies who choose their positioning by copying the market leader. The reasoning for doing so is that the strategy appears to be working—it is creating the success for the leader. Therefore, it must be the best strategy, and why shouldn’t I want the best strategy for my company?

This logic is based on a faulty assumption. There is no such thing as the single best strategy for all businesses in your field. After all, there is no single best flavor of barbeque sauce for everyone. Why should we believe that there is one single best strategy that everyone should use?

In fact, the opposite is usually true. If the market leader already owns a particular strategic position, unless they make a mistake, it is highly unlikely that you will be able to profitably take that position away from them. You are better off picking a different position to go after. In other words, if the hot barbeque position is already taken, go after the sweet barbeque position.

You are not running the same company as your competition. You have different strengths, different assets. Instead of copying someone you are not, find out what opportunities are available in the marketplace that match up best with your skills and competencies. Rather than asking, “What is the best strategy,” you should be asking yourself “What is the best strategy for me.”

Strategy is not about trying to copy the leader’s position—it is about finding out how to make yourself different from your competition in a way that satisfies a significant group of people better than anyone else. If the leader owns the hot barbeque position, you may not be able to compete well against the leader on the heat dimension. But then again, if you counter by owning the sweet barbeque position, the leader cannot compete well against you on your position, either. It is your differences that make you strong.

Choosing a strategic position is like choosing which flavor of barbeque sauce to sell. There is no single best barbeque flavor that will please everyone. If you try to make a one-size-fits-all flavor, you will end up being inferior to all of the competitors who focus on doing particular flavors well. The same is true with strategic positions:

  • Rather than trying to please everyone with a single strategic position, make a choice of who you will serve (and who you will not serve) and then focus on the position that makes the most sense for your chosen segment.
  • Rather than trying to be the best at everything, make trade-offs. Determine what you will do less of so that you can do a better job in other areas.
  • Don’t copy the market leader. Instead, find a unique and differentiated position that works best for you.

With all of the choices and decisions that confront a business each day, sometimes the most useful information is not what your company has chosen to do, but rather what your company has chosen not to do. In most good strategic positionings, what you have chosen to excel in is a much smaller list than all of the flavors of options you have rejected. A clear understanding of all of the things you have rejected will make it easier to dismiss the majority of the “noise” in front of you on a daily basis, so that you can focus on what is truly important.

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