Monday, January 11, 2010

Strategic Planning Analogy #303: Oklahoma Land Rush

Back in the late 1800’s, there was a widespread desire in the U.S. to take the vast, uninhabited areas of the western territories and populate them landowning farmers. Many felt that the U.S. government should provide that land to the farmers for free.

To make this possible, the government passed the Homestead Act of 1862. This law stated that if an individual met a small list of qualifications, they could end up owning 160 acres of former government land for free.

This law became very popular, and many used it to become western landowners. It was so popular, in fact, that there was pressure on the government to open up more even more land for homesteading.

The biggest such increase came on April 22, 1889, when 2 million acres (8,000 sq. km), was made available for homesteading in what eventually became the state of Oklahoma. The process worked like this. Those wanting to make a claim to land lined up along the exterior border of the territory. Then, at exactly noon on April 22nd, a canons were fired to signal the beginning of the rush. At that point, those standing at the border could rush into the territory to stake a claim to property.

There were at least 50,000 people rushing in to claim one of about 12,000 available plots of land. With a day or so, the initial process was pretty much completed, but not without a lot of stress and difficulties. Many drowned trying to cross the rivers to get to the land. Fights broke out as multiple parties tried to stake a claim to the same land. Many perished or gave up before meeting all the requirements needed for gaining full ownership.

Not only was land grabbed for farming on April 22nd, but there was land grabbed for building cities to support the farms. Towns sprang up out of nothing. By the end of the first day, the town of Guthrie, which did not exist before noon that day, had a population of around 10,000 people. These claims were also very difficult to get and keep. Lack of adequate food, water and money caused many to walk away from their claims only a few days later. Those who stayed typically endured much hardship for a long time.

To learn more about the Oklahoma land rush, go here.

Home ownership has always been an important desire of American society. For many Americans, the definition of personal success has included the idea of owning your own home.

Successful businesses also tend to require ownership of something—a viable position in the marketplace. If you do not own a position in the marketplace, then there is no strategic reason for why your business should exist.

There are many ways to define a position. For example, in the case of automobiles, you can define your position by the demographics of your customer, e.g., THE car brand for young adults (Scion). You can define it by the nature of the product/service being offered, e.g., THE car brand for reliable cars (Toyota). You can define it by the overall experience, e.g., THE most hassle-free experience (Saturn).

Regardless of the definition of the position, the key point is that your business needs a position and it needs to be more than just an aspiration—it needs to be owned.

Are you willing to put in as much effort as the Oklahoma land rush people did to claim their point of ownship?

The principle here is that it takes effort to successfully own a position in the marketplace. By using the requirements of the Homestead Act of 1869 and the experience of the 1889 Oklahoma Land Rush, we will demonstrate what it takes to build a winning position in the marketplace.

1) Stake a Claim
Before you can own a position, you must first stake a claim to that position. For the Homestead Act, you could not claim land that was already claimed or owned by someone else (other than the government).

The principle here is that successful business positioning tends to make claims for positions which are not already strongly owned by someone else. Once the customers associate a particular brand with owing a position, it is very difficult to convince those customers to change their mind and give that ownership to someone else.

Therefore, you must be willing to race to be first to make a position claim, just like the Oklahoma land rushers. This requires speed (to get there first) and aggression (to fight off those trying to claim the same position).

There is currently a big fight going on for staking out positions in the electronic book reader arena. At this month’s big Consumer Electronics Show, a large number of companies announced plans to get into that space. However, firms like Amazon’s Kindle, Sony and the Nook (associated with Barnes and Noble) have already gotten a head start by rushing out early and fast, staking claims to superior distribution channels and getting their names out in the public. It will be hard for the laggards to find a place to stake a claim. If you are late to the rush, like Apple, you will need to find a differentiating position not yet claimed, like coolness of design or superiority in apps.

2) Proper Match
The U.S. government did not want land ownership in the hands of people hostile to the intents of the United States. Therefore, the Homestead Act required owners to be “a citizen of the United States, or who shall have filed his declaration intention to become such, as required by the naturalization laws of the United States, and who has never borne arms against the United States Government or given aid and comfort to its enemies.”

The principle here is having the proper match between your character and the character of the position you desire to own. If you wanted American land, you needed to have characteristics in common with America. Otherwise, you were not deemed worthy of such ownership. Similarly, if you want to own a business position of “reliability,” you need to be a fundamentally reliable company in your character. Otherwise, consumers will not deem you worthy of holding such a position.

Wal-Mart has tried on several occasions to stake a claim in fashion apparel, but consumers see that as beyond the capabilities inherent in Wal-Mart’s character/image, so they do not deem them worthy of an ownership stake in that area.

It is difficult enough trying to own a position when you are skilled at delivering the promises inherent in that position. If these skills are not natural to your nature, it becomes almost impossible.

Therefore, when looking for positions to claim, simultaneously consider who you are as a company. Make sure that your capabilities and your image match up well with that position. Otherwise, you will lose the battle for ownership.

3) Longevity
The Homestead Act required that the person build a house on the property and live on the land for five years before they could apply for ownership. The government wanted the land in the hands of those dedicated to making it their home, not in the hands of opportunistic land speculators.

The principle here has to do with longevity. If you want to own a position in the minds of the marketplace, you have to stick with it—year after year after year. A position is not just some marketing slogan that changes every year with the latest fad. It is the essence of why your business exists—the unique and differentiating reason why consumers should prefer your brand over the competition on an ongoing basis.

It can take years to build a solid enough history to deserve ownership in the minds of the customer. If you keep changing your position all the time, nobody will know what you stand for (after all, it would appear that even you don’t know what you stand for). You will not appear to be serious and dedicated enough to deserve the right to ownership of any particular position. Nearly all your great brands have held steady to their positions for the long haul (e.g., Wal-Mart on Price, Apple on “coolness”, BMW on ultimate driving machines, etc.).

You need to settle in and make it your home for many years. Otherwise, you will be seen as an opportunistic speculator, someone people do not want to do business with.

4) Substance
Finally, the Homestead Act required that during the five years you lived there you must prove you used a portion of the land for faming. The government wanted these to be productive, viable farms.

The principle here has to do with substance. A position has to be more than just words. It must be backed up with actions. If you want to claim to be a farm, you have to do some farming. Similarly, if you want to own a position of quality, you’d better be capable of producing quality.

If there is no provable substance behind your position claim, you will lose the right to own it in the eyes of the customers. Toyota has held a position of reliability for many years. It was not only backed up in words, but in provable documentation by independent raters of their brand (like Consumers’ Report). Lately, those ratings have slipped compared to competition and Toyota has had some massive recalls. If this continues, Toyota could lose its position (and the market share and premium prices which go with it).

Business success typically depends upon owning a viable position in the marketplace. If you want consumers to give you credit for owning a position, be sure to:

1) Rush to stake (and defend) a claim in uncontested territory;
2) Choose a position consistent with who you are and what you represent to the customer;
3) Stick with your same basic position year after year after year;
4) Deliver provable substance to back up your positional claim.

As it turns out, much of the land in the 1889 Oklahoma Land Rush was not really suitable for farming. Many could not make a viable living as a farmer on the land and gave up before the five years were up. For those families who stuck with it, most ended up losing their farm a generation later during the Great Dust Bowls of the 1930s. As it turns out, even if you own a position, it does you no good if the position is not economically viable.

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