Wednesday, September 8, 2010

Strategic Planning Analogy #350: All the Way

Once upon a time, Bob decided he would try to jump over the Grand Canyon. People told Bob that the Canyon was too wide and too deep. If he tried to jump the canyon, he would not make it to the other side. Instead, he would fall to his death.

Bob was not worried. He said he had read a book about attempting difficult tasks. The book said that if you want to accomplish nearly impossible tasks, all you need to do is break down the large, difficult task into series of smaller, more manageable segments. Therefore, Bob broke down his jump across the Grand Canyon into a series of smaller jumps. Bob’s conclusion: “I am not able to make the entire jump in one leap, so I will plan to do it in five consecutive smaller jumps.”

Needless to say, after the first of his planned five jumps, Bob was no longer around to finish the other four jumps. He had fallen to his death on the first jump.

Not all tasks can be broken down into smaller segments. Either you make it all the way across the Grand Canyon in one leap or you do not make it across at all. In the case of the Grand Canyon, a partial, or half-way attempt does not get you partially or half-way to the other side. It only takes you on a path downward to your death.

The same is often true in business. Strategic initiatives which only go “half-way” in a particular direction do not usually give you half the benefit of going “all-the-way.” Instead, half-way can be worse than staying where you are.

By going half-way, you do not really stand for anything in the mind of the customer. Others, who have taken either extreme, own the viable positions. Because you do not fully own a position, you do not provide a reason for consumers to prefer you. Therefore, by being in the middle, you fail.

Solid footing on either side of the Grand Canyon is a good thing. Trying to provide “the best of both worlds” by being halfway between those two sides of the canyon provides no footing at all, so you fall. Similarly, when choosing your strategic position, make sure you jump far enough to reach solid footing. Make sure you move far enough to truly own the new space. Don’t settle for half-way.

The principle here has to do with critical mass. If you want to be considered a viable alternative for a particular strategic position, you need to surpass a minimum threshold of value in the direction of that position. For example, if you want people looking for low prices to consider you as a low price alternative, you need to prices to be below a certain threshold to be considered. That threshold becomes your critical mass. If you do not meet the critical mass, then you are not even considered. Going half-way to the critical mass is worthless. All the effort to go half-way will get you nothing, since you have not moved far enough to be considered a viable alternative. It is like jumping half-way across the Grand Canyon.

I was reminded of this principle over the weekend while driving to Chicago for a mini-vacation. While driving across the countryside, I stopped at a number of fast food restaurants. One restaurant I did not stop at was Burger King. The reason? Their strategy only went half-way. They did not have enough critical mass in any direction to give me a reason to prefer them. I will give two examples of this.

Traditionally, fast food restaurants have not been the best places to get a cup of coffee. Other options, like Starbucks, provided better coffee—both in terms of taste and variety. If you were a coffee aficionado, fast food restaurants were not on the list for consideration. Burger King was the first to try to change the coffee reputation in the fast food industry. They introduced BK Joe, which was a better cup of coffee than the other fast food coffees at that time.

Unfortunately, this was a half-way move. Although the coffee was better than other fast food offerings at the time, it was not good enough to be a viable alternative to the coffee shops. There was not enough of a critical mass—in flavor or variety—to become a viable alternative in that space. Similarly, the coffee was not superior enough to get large masses of other fast food customers to switch their entire meal to Burger King just to have BK Joe with their meal.

By contrast, look at how McDonald’s pursued coffee. Rather than go half-way, they went all the way. They not only introduced better coffee, but coffee good enough for many coffee lovers. They also introduced all the relevant varieties of coffee, including lattes, mochas, and iced coffee. They had enough of a critical mass to be able to sub-brand the area inside the McDonalds as McCafe. By going all the way, the McCafe was seen by many as a viable alternative to the coffee specialists, while also having the advantage of being lower priced (and often more convenient) than the coffee specialist.

The most recent addition to the McCafe has been fruit smoothies. This further solidifies McDonald’s as owning the convenient, value-priced quality beverage space. While driving on the trip, my wife and I wanted to make a quick beverage stop. We ended up at a McDonald’s, because we wanted their fruit smoothies. Even though there was a Burger King across the street, we did not even consider it. Not enough critical mass.

In another attempt to stand out from the fast food crowd, Burger King decided to offer bigger, better burgers, made with a higher quality of beef and better toppings. Unfortunately, Burger King continued with the half-way approach. The variety and quality did not reach enough of a critical mass to change the perception of Burger King. It was merely an add-on to the traditional menu, so they still had a traditional fast food image overall.

Those who love great burgers tend to go to the more upscale casual dining restaurants, where the quality and variety of burgers is greater. Burger King’s half-way change simply was not enough to be considered a viable alternative to these casual dining burger restaurants. Similarly, the upgrade was not so dramatic that other fast food restaurants could not imitate it. McDonald’s added their own version of a better burger to the menu, essentially negating any prior advantage Burger King had.

Now contrast Burger King’s half-way approach to the approach of the Hardee’s fast food restaurant chain. Hardee’s also wanted to go after the bigger, better burger segment. However, unlike Burger King, Hardee’s went all the way. They completely abandoned their old traditional menu, eliminating anything that worked against the bigger, better image. They branded their premiere burger the “Six Dollar Burger,” not because they charged six dollars for it (they actually charged much less), but because Hardee’s claimed it tasted as good as the six dollar burgers found in the casual dining chains. They rebranded their hamburgers as “thickburgers.” They came up with a large variety of different thickburgers, enough to create a critical mass worthy of competing against the casual dining chains.

Once the burger position was solidified, other quality moves were made. For example, the shakes at Hardee’s are now made using real scoops of hard ice cream, not a soft-serve machine like other fast food restaurants. And most recently, they stopped using frozen, pre-breaded chicken strips like the others. Now they bread them fresh right at the restaurant.

Because they went all the way, Hardee’s has now become for many a viable alternative to the casual dining restaurant, an alternative that is more convenient and costs less. Instead of being seen as an inferior McDonald’s (as they were before), they now own a viable position in the marketplace.

When it was time to stop on the road this weekend to grab a quick hearty meal, my wife and I stopped at a Hardee’s, even though there was a Burger King nearby. The choice was obvious.

The Results
So what are the results of half-way versus all the way in fast food? Well, the McCafe has been a huge success for McDonalds, no matter how you measure it: sales, traffic, profits or stock price. Burger King has given up the fight on owning coffee and has announced it is going to start selling “Seattle’s Best” coffee, a brand owned by Starbucks and available at lots of other restaurants (no longer a proprietary differentiator).

Overall, Burger King has been losing traffic and has had a declining stock price. It’s franchisees are furious because they think Burger King is mismanaged. As a result, this past week Burger King was sold to a private equity company called 3G. The hope is that by no longer being a public company, there is the time and patience to fix the company.

As for Hardee’s, if they had not shifted their position, there is a good chance they would no longer be in existence. Now, they own a niche which gives them a reason for existing. Oh, and by the way, the company that just bought Burger King used to own a sizable piece of the company that owns Hardee’s. Perhaps they will put the knowledge they learned there to good use at Burger King.

When it is time to position (or reposition) your company, do not go half-way. Half-way positions do not provide enough critical mass to give consumers any reason to prefer you. Even if it means abandoning a lot of what you used to stand for, be bold and go all the way. Then you will be standing on solid ground (“owning” a reason to be preferred). This is much better than going half-way and finding yourself halfway across the Grand Canyon with nowhere to go but down.

This week Burger King has announced a change to their breakfast menu. Management admitted that their old approach to breakfast (which, as one would expect, only went half-way when compared to McDonalds), was inadequate. To quote Burger King CMO Mike Kappitt’s assessment of their old approach, “We've almost abdicated [breakfast] to McDonald's.” The revised breakfast menu has added nine new items. I don’t know if that is enough to create a critical mass, but at least it looks like maybe Burger King is finally waking up to the error of going half-way.

1 comment:

  1. Hello Gerald, A great inspirational insights from the Grand Canyon- one of my favorite places. I must say this – Gerald, you are a unique person I have known -who is capable of coming up with these focused insights from nature- like the “Ace Archer Arjuna” could. Apparently Arjuna’s Guru – while teaching archery -asked his students to shoot a specific apple from a tree that was buried deep inside behind the leaves. While every other student was seeing leaves, birds, branches etc. beside the apple - Arjuna was seeing –“just the apple” as he had trained his inner eyes to just focus on what he was tasked to do. The moral of the story- although, people might be there to distract us with their intentional maneuvers –the inspirational focus is key- like Gerald’s inspirational focus of Grand Canyon – resulting in a great positioning story like this one!

    Speaking of your Critical mass principle of “critical mass becoming the threshold” - I am reminded of the par of the lyrics from the “Critical mass album by Threshold”.
    “We`re approaching the critical mass

    What will become of the spirit of man?

    What is the story and how does it end?

    Where are the boundaries and where are the doors?

    Who are the heroes for fighting this war?”

    On most situations- some product launches (or for that matter business models and/or strategic initiatives) do no reach the threshold of critical mass -partly because we fail to ask and answer the following critical mass questions -per the lyrics above!

    • The Spirit part – Do we have the invisible instructions or the purpose/values part- that tell the strategic initiative to grow in to a successful business as we tell it to grow? This is what happened in the case of McDonalds that they had a larger purpose of making consumers to experience a wonderful end-to-end breakfast experience as opposed to just serving one flavored coffee!

    • The Story Part – Do we have an easy to “understand /experience /relate to” type of a memorable story line to tell - when consumers experience the product category from excellence, relevance and value dimensions? Again, in the McDonald’s example, they not only introduced better coffee in a reasonable price (value part), but also various flavors including lattes, mochas, and iced coffee etc- which in my mind – not only addresses the excellence dimension, but also, the relevance and value dimensions – or in your words- a sufficient critical mass story line to reach the consumer acceptance threshold!

    • The Boundary Part – Have we done the upfront home work (i.e. analytically arriving at all the threshold/adjacent boundaries) so that we know for sure how far we need to stretch our legs to reach all the possible boundary thresholds on the first try itself? Here again, McDonald did not stop with Coffee, but also expanded in to all other beverage adjacent experiences - like smoothie, ice cream shake, summer flavors etc.

    • The Door Part – Have we done through analysis on the market entry options (exporting, Licensing, Franchising, JV, Direct Investment etc) from risk mitigation standpoint along with an exit strategy?

    • The Heroes Part – Last, but not the least – do we have the right people on the ground to execute the strategy flawlessly?

    Finally, failing to answer these questions properly will invariably result in half way launches or the so called “stuck in the middle” or “being caught between rock and hard place” positioning. History is filled with many examples of companies that were “stuck in the middle” for a longer period of time – and eventually going down -and so it is not a pleasant place to be in. Let us face it - it is important that companies take proactive measures and avoid getting in to the so called – “half way or stuck in the middle position” in the first place -rather than trying to come out of it later. Granted, one can always come out of any situation with determination (& never give up attitude!)- but, the proactive measure of never getting there in the first place is the way to go!

    Great story Gerald!