Monday, July 27, 2009

Strategic Planning Analogy #267: It Must Be Better

Many years ago, there was a comedian who specialized in doing impersonations. Now, it used to be that a lot of comedians did impersonations. This comedian, however, put a unique spin on the genre. He specialized in doing impersonations of people who died long before the invention of recorded sound.

For example, he would do impersonations of people like Abraham Lincoln or Aristotle. It was interesting to watch, but was it accurate? I have no idea what Aristotle sounded like or what his mannerisms were. For all I know, this comedian could have it all wrong and not even be close.

But in the end, I guess it doesn’t matter. Since nobody else knows what Aristotle sounded like or acted like, nobody could challenge the accuracy of the impersonations. As long as the comedian was funny, the audience would accept his impersonations. It was those other comedians, who did impressions of people we knew, who were more sharply critiqued (“Hey that’s not what John Wayne sounds like”).

When nobody knows what truth is (and nobody is able to discern the truth), then nobody can effectively challenge your position. This was the situation the comedian was in. Nobody knew what those ancient people sounded like or acted like, so the audience could not challenge the comedian’s impression of these old people. They just sat back and enjoyed the show.

However, if someone is doing an impression or imitation of something you are very familiar with, then the criticisms come flying. You know what “truth” is because you have experienced the real thing. Any variation from the real thing will be noticed as a flaw or defect. Rather than just sitting back to enjoy the show, you compare the imitation/impression to the reality (as you remember it) and get upset if the imitation does not live up to your expectations of what truth is. You’ll shout something like, “I know what John Wayne sounds like and acts like, and that was not it!”

This situation is similar to what happens in business. In product development, you have one of two strategic choices: either create something totally new, unlike anything else in the market OR create a “me, too” product that is a variation of something which already exists.

The first choice would be like our comedian, who did impressions that were totally new to you (you had never heard the voice of these people before—you have no reference point). Similarly, totally new products have no reference point—what you invent defines the category. It is accepted as authentic and people enjoy it for what it is.

The second choice (offering a “me too” product) is like comedians who do impressions of people we are very familiar with (you have a reference point). You are more critical, because you have a benchmark to compare it to. Any variance from the original reference point makes your product less “authentic.”

The principle here is that the less the familiarity, the greater the acceptance. Therefore, if you blaze new trails in product development towards areas unfamiliar to your customers, your development efforts have greater potential for acceptance.

We could see this principle at work in the comedian story. We are more forgiving of the comedian going where we’d never been than ones covering familiar impressions with a slight imperfection. I also experienced this principle recently in a restaurant. This was no ordinary restaurant. It was an exotic restaurant specializing in exotic foods which I had never eaten before. Heck, I couldn’t even pronounce the words on the menu, let alone understand it.

When the food came out, I had no preconceived notion as to how it was supposed to taste. I had never eaten anything like this before. Some of it tasted fine. Some of it tasted very odd to me. But since this was a nice restaurant with a good image, I assumed they were all supposed to taste like that. It never occurred to me that the dishes might be prepared wrong. They supposedly had excellent chefs, so I just took it for granted that these concoctions were supposed to taste that way—even if I didn’t like it.

But what if I was wrong and the food really was prepared poorly? What if this really was bad tasting food? I wouldn’t know. So I was satisfied, whether it was right or wrong, because I didn’t have a pre-conceived notion of what “good” would taste like. I just sat back and enjoyed the dinner.

Now if this fancy restaurant had served me a hamburger, I would have had a reference point. I could have complained if their gourmet burger drifted too far away from my concept of what a hamburger is supposed to look like and taste like. But they did not offer a “me too” burger. They offered me a taste of the unknown. A taste of the unknown is always yummier than an off-beat version of the familiar.

You can also do this at the low end of the restaurant spectrum. Quiznos has had great success with their $4 Torpedo. The beauty of the Torpedo is that it is so unlike anything else out there that there is no reference point to tell if it is a good torpedo or a bad one—so you accept that it is a good one, and worth the $4.

Quiznos knew that having a $4 item on their menu would be a key to success in this recession. They could have lowered the price of their familiar regular sub sandwich to $4, but that would have caused problems. First, once you lower the sub to $4, there is an expectation that $4 is now the right price for that sub. It would be difficult to raise the price back up later without ruining the new perceived value. Second, the regular sub is not designed to work in the business model at $4. Either you have to cheapen the sub (which would be noticed, since people were familiar with it) or you have to lose money on the deal.

By contrast, the Torpedo was designed to work in the business model at $4. It wasn’t a “cheapened” anything, since it was brand new. Sure, it had less meat than a regular sub, but the Torpedo never was a regular sub and was not expected to be one. It was a Torpedo, and this is how Torpedos are supposed to be. They had never been anything else. A strategic piece of genius!

So what does this mean for your strategy?

1. It is almost always better to create something brand new, where you can define the parameters of success, than to copy someone else, who has already defined success (as being them). When you control how a product is defined, then you can define the perfect product as the one you are offering. Apple has been very good at this.

When Toyota invented the Prius, they made a brand new car which defined what a hybrid is supposed to be. After that, anyone else who tried to make a hybrid brand had to be compared to the definition of the perfect hybrid—the Prius. And of course the Prius is the superior Prius, so it wins. Worse yet were automakers who tried to make a hybrid version of a non-hybrid car people were already familiar with. That didn’t work, because their familiarity with the gas hog version biased them against the hybrid version (familiarity made them more critical).

2. When positioning your product, don’t spend too much time comparing it to the status quo product. If you make too big a deal out of the status quo, you are acknowledging its leadership, which makes you an also-ran. People will say, “If you are so good, then why does the status quo have higher sales?” Instead, position yourself as an entirely new way to solve an old problem. There’s just something about saying that “my revolutionary new way is better” which sounds more believable than saying “I’m making basically the same thing as what is already out there and successful, but I’m better.”

3. Sometimes you can get around cost pressures by replacing the familiar with a cheaper unknown which is positioned as a wholly new product. Cheese was getting very expensive, which is a problem for companies like Taco Bell, who use a lot of cheese and want to keep their prices low. But Taco Bell has never been afraid of inventing new menu items nobody has ever heard of. So the new items substituted cheaper cheese sauce for cheese. However, since these were brand new items that never had real cheese in them, it didn’t look like a cheap substitution. It was just how the new item was supposed to be. This is far more successful than if they had taken familiar items and did the substitution. Then, Taco Bell took this cheap sauce and put hot spices in it and invented “Hot Lava Sauce.” So now the cheaper substitute was a unique, premium item in brand new menu items.

Winning strategies tend to blaze new trails rather than rework the familiar. The revolutionaries get to define the category in their favor and tend to receive less criticism. Because they define the category, they must be right.

Even if your product is not all that revolutionary, that doesn’t mean that you cannot package it in a revolutionary manner. Chrysler was making fairly ordinary trucks, but they were packaged as revolutionary because they had the magic Hemi engine.

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