Tuesday, March 18, 2008

Analogy #166: Symbiosis

The relationship between the job seeker and the headhunter is an interesting one. To the headhunter, the job seeker is neither a client nor a customer. The job seeker does not hire the headhunter nor purchase anything from the headhunter.

The headhunter receives no income from the job seeker. In fact, in many ways, a jobseeker can be a major pest to a headhunter—always calling and bothering the headhunter. Yet the headhunter puts up with it and even works to help the job seeker become successful in getting a job.

Similarly, the headhunter is neither a client nor customer of the job seeker. The job seeker receives no income from the headhunter. Yet, when a headhunter pesters a job seeker to help come up with a list of contacts for potential job candidates, the job seeker typically jumps at the opportunity to supply names. The job seeker wants to help the headhunter be successful.

Why are the headhunters and job seekers working so hard to help each other become successful, even though neither profits from the other? The reason is because of a mutual self-interest in a third party—the job hirer. If the head hunter can help get the job seeker a job, they get paid by the hirer. If the job seeker can help the held hunter get them the job, they also get paid by the hirer.

Therefore, it is in the best interest for headhunters and job seekers to help each other, because they can both gain from it via the job hirer. By helping each other, they are helping themselves.

Looking for a new job can be a daunting task. Any help you can get in the process is very welcomed. Although there are many sources to tap for assistance, some sources will work harder for you than others. Often the ones that work hardest for your success have some selfish motive, like a headhunter.

The benefit may be indirect and tangential to your success, but so long as there is a connection between your success and their eventual success, they are incented to help create your success.

For example, once when I was looking for a job, one of the biggest helpers I had was a consultant I had used in the past. He went beyond mere friendship and went the extra mile for me. Why? I suspect it had something to do with the fact that if I landed a really good job because of him, I would be more likely to use him as a consultant at that new company. In essence, I would be an opening he could use to get into the door of that company if it hired me.

The reason why I would help a headhunter find someone to fill a job for which I am not qualified is indirect. The more I help a headhunter, the more I would hope that the headhunter would remember me when a job which fits my qualifications comes up.

Similarly, if a headhunter does a good job of helping me get hired, perhaps down the road when I need to hire someone, I will use that same headhunter.

Attaining strategic success can be similar to trying to find success in getting a job. It can help if others have a vested interest in having my strategy succeed. The more others benefit from having my business strategy succeed, the more likely they will help to make that strategy succeed. This is true even if the benefit comes from another source.

Therefore, just as you would tap into other sources to help you with job hunting success, tap into others to help with getting successful strategy implementation. And the more you can tie their success into your success, the better.

The principle here is symbiosis—two parties working together because each one benefits. Symbiosis can be a critical element of strategic planning. This is particularly true if one’s current position is failing and there is a need to move the company to a radically different position.

Once a company gets into the “death spiral,” it can be very difficult to move to a path of prosperity. In a death spiral, the marketplace has pretty much rejected you as a primary or viable alternative. The market has chosen someone else as a more desirable alternative. Neither customers nor suppliers see much reason to deal with you or think about you any more.

It is difficult enough to develop a new strategy to revitalize a brand that has been rejected. Then on top of that is the added burden or convincing people to give you a second chance. Succeeding on both of these tasks is extremely difficult. This is why complete turnarounds are so rare.

As a result, why successful turnarounds need “friends”—other people who will go out of their way to help make this transformation successful. As in the story of the headhunters, friends tend to be more helpful if there is something it for them if you succeed—a symbiotic relationship. Therefore, if you are dealing with a turnaround strategy, it helps if you seek out symbiotic relationships as part of that strategy.

Complete turnarounds in the retail business are rare. When I find one, I examine it carefully to see why it succeeded. Recently, the Lord & Taylor department store chain was declared a successful turnaround by the International Herald Tribune. Although many factors went into that success, a key factor was symbiosis.

Lord & Taylor has been around since 1826. In the early years it had the reputation of being a classier, higher end department store. However, in 1986 it was purchased by the May Co. Under the May leadership the classy brand was destroyed. High end goods were replaced with lesser brands. No money was put back into the stores, making them look like a dump. Service and quality were reduced or eliminated in order to lower expenses. To get customers in, they started shouting price and pushing an endless number of coupons into the market. In other words, they had to bribe people with coupons in order to get any interest.

Lord & Taylor lost its relevancy in the marketplace. There was no reason to prefer shopping there. Other department stores had won over the customers. The desirable brands stopped supplying the chain. When Macy’s purchased May Co. in 2005, they saw no reason to keep the brand and sold it. Lord & Taylor was being rejected on all fronts.

Lord & Taylor was purchased from Macy’s by Richard Baker through the fund NRDC Private Equity. He teamed up with Lord & Taylor CEO Jane Elfers to create a turnaround. The strategic goal was to restore Lord & Taylor to its former image as a classy, contemporary higher end department store. Easy to say, difficult to do.

Lord & Taylor needed symbiosis on both sides—with suppliers and with customers. Jane Elfers was a strong merchant with a long history of dealing with the branded clothing manufacturers. A key part of the turnaround required that she get these brands to actively support the turnaround by allowing Lord & Taylor to sell their better brands again.

The only way to get the brands back was by convincing the brands that it was in their best interest. The angle? Position Lord & Taylor as a way for the brands to regain a balance of power. At the time, Macy’s had consolidated the market to the point where the better brands had very few selling alternatives except to sell through Macy’s. Macy’s had all of the negotiating power. If you didn’t bow to their demands, they could cut you off and leave you with virtually nowhere else to go.

By actively supporting the drive to make Lord & Taylor succeed, the brands would create an alternative to Macy’s. This would weaken the negotiating power of Macy’s and strengthen the power of the brands. Hence, it was in the best interest of the brands to support the transformational strategy of Lord & Taylor.

A similar situation occurred on the consumer side. In its rush to create a national department store brand, Macy’s quickly severed ties with the old names and quickly (& coldly) slapped the Macy’s logo on all of the acquired department stores. This alienated many of the consumers who resented losing their favorite brands (like Marshall Fields) in such a “heartless” fashion.

Another group was alienated from Macy’s because they resented the homogenization of the department stores. Why pay the extra price to go to a Macy’s department store if it feels like a mass merchant?

Lord & Taylor was able to tap into these alienated groups who were looking for someone to succeed at providing a viable alternative so that they would not have to rely on Macy’s.

The two symbiotic relationships fed on each other. As the manufacturers supported Lord & Taylor, it became more desirable to the customers. As more customers supported Lord & Taylor, the manufacturers started shipping even more of their better brands.

Without these symbiotic relationships, the transformation may never have worked.

It is difficult to transform a company when suppliers and consumers have rejected you and found other alternatives. To succeed, you must often find mutually beneficial reasons for suppliers and customers to want you to succeed.

The more people who can win from your success, the more likely you will have a success.

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