Monday, November 19, 2007

Strategic Planning Analogy #130: Strategy Gifts

There is a story told about boxer Mike Tyson. Mike grew up under less than ideal conditions. He was born into poverty in a bad section of Brooklyn. His father left when Mike was only two years old, leaving his mother to try to find the means to raise the family.

Mike was expelled from junior high school for fighting and spent a number of years in juvenile detention centers. To raise money, Mike got involved in petty crime. By the age of 13, he had been arrested 38 times. Eventually, Mike Tyson ended up being placed in the Tryon School for boys in Catskill, New York.

It was here that his boxing skills were discovered and he was put on a path that would eventually lead him to becoming the world heavyweight boxing champion in 1986. With the fame came money. For the first time, Mike Tyson was not in financial need.

Companies wanted their products associated with a successful boxer like Mike Tyson, so they started showering him with cash or free products to try to get his endorsement. All of this amazed Mike.

He is claimed to have remarked on this strange phenomenon by saying something like the following: “When I was poor, I begged people to help me and nobody would pay attention to me. Now that I am rich and can afford to buy things on my own, people give me stuff for free...even a new free car. Where were all you people when I needed the help?”

There’s an old saying that “The rich get richer and the poor get poorer.” This seemed to be the case for Mike Tyson. When Mike Tyson was poor, there didn’t seem to be any way out of the poverty cycle. Things just seemed to continue to get worse. However, when he got his lucky break of being discovered at the Tryon School, it put him on a path to boxing wealth. That wealth lead to a great number of opportunities to get even wealthier.

Mike Tyson really didn’t have any strategy to get all of those extra sources of income. He just knew how to do one thing well (boxing), and that success created its own opportunities for other successes, all initiated by others.

Similarly, there are businesses that do only one thing well, which place them in a powerful position. Others, who want to take advantage of that success start throwing great business opportunities at them. This creates greater success for the firm. It didn’t come by any pre-planned strategy. The ideas just came unsolicited by people who wanted to use the company for mutual gain.

Sometimes, the only strategy one needs is to create a point of power in the marketplace. Once the power is created, others will supply you with preferential access to all of the future opportunities one needs. Your only strategic responsibility at that point is to determine which of the many opportunities are best for your company.

The principle here is “the power of the gatekeeper.” Gatekeepers provide access to something you cannot reach on your own. That could be access to distribution channels, access to customers, access to money or whatever. Mike Tyson was a gatekeeper providing access to a certain type of demographic (his fans) who tend to be difficult to reach with traditional media. As a result, firms were willing to offer a large number of great deals to Mike in the attempt to access that demographic.

If you can create a strategy where you become a powerful gatekeeper, then others will shower you with opportunities as they did for Mike. Look at Oprah Winfrey. She is such a powerful gatekeeper that everyone wants to jump on her bandwagon. If you are an author, Oprah can be a great gatekeeper to readers. Huge numbers of firms want to pay large sums to advertise on her show or in her magazines. The opportunities are unlimited, creating great wealth and making Oprah a billionaire.

The Chicken McNugget was not invented by McDonalds. It was invented by Tyson Foods (not related to Mike Tyson). Tyson Foods believed they had a potential hit on their hands, but they needed a gatekeeper to give them access to the fast food channel. Since McDonald’s was the strongest gatekeeper in the channel, they started there. At first McDonald’s was reluctant to take on the product. It took a lot of time and a lot of coaxing by Tyson Foods to get McDonald’s to try the idea. It eventually became one of their greatest product launches.

There was no strategy here. McDonalds had no desire to get into the chicken business. They had no creativity to invent something like a McNugget. At first they even rejected the idea. It was only through the creativity and persistence of an outsider that they got into the business.

I had a conversation with a former strategy executive at McDonalds. He told me that when he first came to McDonald’s, he expected to find great masterminds at marketing. Instead, he found very little marketing expertise. Either they bought it from an ad agency, or the ideas came to them from outsiders who wanted to tap into their power. He said the only thing they were really great at was running a highly efficient restaurant process. That high level of efficiency, combined with rapid expansion, created the market presence that lead to gatekeeper power with fast food and for families with small children. The rest of the success just sort of fell into their laps.

Whenever a new technology opportunity comes up, there are competing forces trying to determine how it will evolve. The question is which of the competing technology standard will win. For example, which high definition TV technology will win? Which high definition video disk technology will win? And so on. Anyone who wants to set the standards for new technology in their favor knows that their potential for success is much greater if they can get powerful gatekeepers on their side. Best Buy has tremendous gatekeeper power in accessing people interested in leading edge technology. Therefore, firms with new technology do whatever they can to become the preferred technology standard at Best Buy.

Best Buy understands the power it has and has created a strategy around exploiting this gatekeeper power. They often essentially pit one standard against the other and see which one will offer Best Buy the biggest prize. Then they back the one that offers the best results for Best Buy.

The point here is that in some cases, one does not need to fully flesh out all of the strategic detail. All you need is a strategy to create gatekeeper power and a strategy to exploit it. If done properly, this will put your firm in position so powerful that you do not need to be geniuses in creating opportunities. Other firms will do all that for you and shove more opportunities into your face than you can absorb. You just need to be wise in picking amongst all the ripe opportunities put in front of you (and wise in properly negotiating the deals with these people).

Now becoming a strong gatekeeper is not easy. If it were easy, there would be more of them and they would command less power. This alone can be serious, time consuming strategic work. The trick is to pick something that other businesses desire, yet find difficult to access. Then you specialize in finding ways to gain that access and then let others start throwing money at you.

This is a common ploy in the dot com world, where if you can create great access to a desirable group of people, then advertisers will be all over you. For example, Google used technology to allow firms access to people interested in a particular search word. This type of gatekeeper power has proven to be very successful for google.

Go out there and find your gatekeeper opportunity.

One approach to strategic success is to own the best access to a desirable resource, such as a particular type of customer, technology, distribution channel, raw materials, a particular type of labor force (highly skilled or highly inexpensive), or some other item. Once you have locked up the access to that resource, the firms who want to access that resource will provide you with all kinds of business opportunities. These opportunity “gifts” will supply more than enough ways to increase your wealth.

Of course, if you manage that gatekeeping poorly, it can lead to ruin. Mike Tyson did not continue to perfect his one point of expertise which lead to his gatekeeping power (boxing). This quickly lead to others becoming the heavyweight champion. In addition, he did not do a good job of proactively exploiting the gatekeeper power at the time when he had it. As a result, in 2003 Mike Tyson had to declare bankruptcy.

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