Friday, June 19, 2009

Strategic Planning Analogy #262: Blind Loyalty

I was listening to an interview with P&G’s outgoing CEO A.G. Lafley shortly after P&G acquired Gillette. Lafley was talking about how he uses all the P&G products at his home. He was excited about adding the Gillette products to the mix because they, too, were already products he used at his home.

Then he paused and remembered that he was currently using Edge shaving cream rather than Gillette shaving cream. Lafley then said, “Well, I guess I’ll be switching from Edge to Gillette shaving cream.”

Goody, goody…Gillette shaving cream has one more customer (Mr. Lafley), because he bought the company. I hope he has additional ideas for increasing share, since that plan (buying the products because you bought the company) is pretty limited.

Lafley felt an obligation to always buy P&G products, for no other reason than the fact that he was CEO of the company. It became a knee-jerk reaction: if P&G owns it, then I have to buy it.

I guess that, as a leader, Lafley felt a need to show confidence in his products. He may have feared what would happen if word got out that Lafley used a competitor’s detergent. Would it damage employee morale? Would customers switch away from P&G products?

I don’t think that would have much of an impact in those areas. I remember when Brittney Spears was doing commercials for Pepsi and word got out that when she was on tour during that time, she had it in her contract that her dressing room would only have coke products. It didn’t seem to cause much of a stir. So I wouldn’t be too worried about that.

What I would worry about is how Lafley’s behavior may distort his business judgment. If you are blindly choosing P&G products based solely on whether your company owns them, then you are acting quite differently from the marketplace. Yes, perhaps a few P&G employees may switch to using Gillette products as a result of the acquisition, but for the rest of the world, the acquisition is a non-issue for brand choice.

The rest of the world needs a more compelling reason to choose your brand. Lafley’s behavior is out-of-touch with the market, which is far less loyal to the brand. This could distort his view of the P&G brand strength.

A similar situation can occur for strategists. If you become too strong of a company person, your perception of the company becomes ever more distorted relative to the rest of the world. You may give too much credit to your own brands and too little credit to the competition. This can cloud your strategic perspective. Your company bias can distort your judgment and cause you to make strategic errors.

The principle here is that Blind Loyalty can blind you from the truth. How can you tell if you are superior to the competition if you never experience the competition? Sure, you can read market reports, but there is a lot to be said for personal experience.

I believe that blind loyalty can distort your perspective of the marketplace. Since strategies are designed to optimize performance within the marketplace, distorted visions of the marketplace can create useless, distorted strategies.

Think about people you have known who have gotten divorced. If you only talk to the wife, you will get a distorted view as to what went wrong with the marriage and probably put too much blame on the husband. Similarly, if you only talked to the husband, you would get a different distorted picture and probably put too much blame on the wife. Depending on which one you are most loyal to, you will have a different perspective on the divorce. If you want the truth about the divorce, you need exposure to both sides and a bit of objectivity.

Similarly, if you only surround yourself with your own products and with your own loyal employees, you will get a distorted picture of your brand. You need exposure to the other side.

I would have been more impressed if Lafley had said in his interview, “I’m a loyal user of Edge and I’m sure there’s a good reason for that. I need to find a way for Gillette to give me an even better reason to use them than Edge.”

Experience the Competition
I knew someone who had been an engineering executive at Ford. Ford put him in a program where he was given a series of competitor’s cars to drive. Every few months, he’d be given a different competitor’s car to drive as his personal car. For each of these experiences, he was to write up his impressions of the car.

This helped him to understand how the Ford engineering stacked up against the competition. He could learn from some of the superior things the competitors did. He could learn where Ford was weak. If he had only driven Ford cars during his employment, they would have missed out on these insights.

No matter where I have worked over the years, I have always told my wife to ignore that knowledge and shop as she normally would. I told her to make her purchase decisions based on what she thought was best, rather than who was paying my paycheck. Although I wasn’t always happy when she chose the competition, I was able to learn from her why she acted that way.

This helped to anchor me closer to the real world. I wasn’t distorted as much by blind loyalty. My perspective was not as overly biased in favor my employer to the point where I could no longer see all the warts on my company that the consumer could see. It made me a better strategist.

Watch Out For Brand Extensions
One place where this distortion causes many problems is in strategies surrounding brand extension. Your blind loyalty (and the blind loyalty of the rest of the decision-makers in your company) can cause you to overestimate the power of that brand. As a result, you overextend the brand into places where it doesn’t belong.

There’s a reason why most brand extension strategies turn out to be disappointments. It is because the rest of the world is not as enamored with your brand as you are, so you over-reach.

Watch Out for New Business Models & Fear of Cannibalization
You can also become so used to doing things the “company way” that you become blind to different business models. Kodak was blind to digital photography because of their infatuation with the “Kodak way” using analog film-based photography. The rest of the world didn’t care that much about Kodak magic moments. They just wanted the best way to get and share pictures. And as it turns out, the digital model was (for most) the superior business model. Blind loyalty blinded management to the need to quickly adopt a digital strategy.

A variation on this problem is cannibalization. You may become so loyal to legacy products that you do not want any type of strategy which will hurt those legacy products. At Kodak, it would have been difficult to get aggressive at trying to own the digital space without hurting the core legacy film business. The new business would have cannibalized the old.

Well guess what. Other companies got aggressive with digital and now Kodak is fighting for survival. Either you cannibalize your business or someone else will do it to you. If you do it yourself, at least you are left with a new, successful replacement business. If someone else does it, you are left with nothing.

The Solution
So what is the solution to avoiding some of these problems? First, you need a corporate culture that shuns blind loyalty and encourages more interaction with the competition. It needs to be okay to question the status quo and say an occasional nice thing about the opposition. The prized image should be that of an objective person, not an overly-loyal company puppet.

Second, spend more time listening to voices outside of your headquarters. Recent technological advances in Web 2.0 make this even easier than before. The more you get involved with your customers, the better your strategic perspective, provided you listen to more than just your most loyal customers. Listen to both the good and the bad comments.

Third, be skeptical. If we, by nature, have too much of a positive bias towards our own company, then we need to counteract that by being overly harsh in our strategic analyses. When estimating the likelihood success of your strategy, shy away from the optimistic scenarios. Be more realistic.

Most leaders in a company have a natural tendency to develop a distorted positive bias towards that company. This blind loyalty can cause us to make poor strategic decisions. One needs to proactively take steps to counter this tendency, in order to help retain more objectivity.

There was an old saying that loyal IBM employees were so loyal that if you cut them, they would bleed in “IBM Blue.” I’d rather your blood was red, because then I would know you were alive and well (and useful).

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