Monday, January 16, 2012

Strategic Planning Analogy #432: Shifting to Stay in Place

The university where I got my MBA used to send me annual updates of what the school was up to. My favorite statistic was the one showing which jobs the current graduating classes were taking. Over the decades, the top jobs kept shifting.

In the early 1980s, the most popular jobs taken by MBA graduates were in working for large industrial corporations. Then, starting in the mid 1980s, the most popular destination was in working as management consultants. During the 1990s, the most frequent career path moved to dotcom entrepreneurism. Then, after the dotcom market blew up, the most popular career path was investment banking. Now that investment banking has seen a bump, it seems that the shift is moving to international.

I learned two things from watching these statistics over the years. First, I learned the constant—no matter which year you looked at, the students flocked to where the money was. Second, I learned the non-constant—where the money was shifted over time.

So the irony is that if you want to stay in the same place (where the money is), you have to keep moving (since the money keeps moving).

This idea does not just apply to careers. It also applies to strategic positioning. Successful strategic positions are located where they optimally satisfy some high consumer demand. This high demand could be for something like “status” or “convenience” or “self-worth” or “freedom” or some similar basic need or emotion. These, like the MBA’s desire for a high-paying job, are a constant. They never go out of fashion. Just as you can count on most MBA graduates to desire a high-paying job—decade after decade—you can count on a large number of customers seeking one of those basic needs and emotions mentioned earlier.

However, the primary means by which these basic needs and emotions are satisfied does change over time. For example, what constitutes status changes frequently like fashions. In rapidly-developing third world countries, status in the past might have been best indicated by how many goats you had. Now, it may be the type of mobile phone you have.

So, just as the type of job which pays the most for an MBA shifts over time, the best way to achieve status or freedom shifts over time.

Therefore, strategists are stuck with the same dilemma as the MBA graduate. If they want to keep their positioning in the same place (in the middle of satisfying a core need), they have to keep moving the position (since the way people satisfy core needs keep changing).

The principle here has to do with positioning. The dilemma is determining what to do when your formerly solid position begins to move out of step with a shift in how consumers want to satisfy that position. Do you shift your offering to retain hold of the former position or do you reposition the offering to something more appropriate after the shift?

At first, one might think that the easiest option is to try to make minor adjustments to your offering in order to keep the old position. Unfortunately, some of the shifts are so dramatic, that minor modifications are not enough to hold the position. Instead you are forced to either completely change the offering or completely change the position.

Example #1: Clothes Vs. Gadgets
Let’s look at three examples. First, it used to be that one of the key ways for teens to establish status was with their clothes and their hair. Wearing the right fashion labels in the most current styles was the primary way to establish that teen status.

But then there was a shift. The primary indicator of status shifted to digital gadgets. The type and brand of smart phone or digital pad became a stronger driver than the brand of jeans. Just watch the status buzz when a teen has a newer, better gadget than their peers.

So what do you do if you sell teen clothing and your old position was to own the best solution for teen status? You cannot make minor modifications to a pair of jeans to turn it into the hottest smart phone. Many teen-based apparel manufacturers and retailers have been suffering because a lot of the teen status money which used to flow their way now goes to Apple brand stores. For the price of a wardrobe of fancy jeans, you can get a lot of cool gadgets with more status power.

Some of the more popular young fashion retailers today (like H&M and Forever 21) are shifting the positioning of teen clothes from high-priced status to value-priced fun (save money so you have more to spend on gadgets). This may be the easier move than trying to go head-to-head against cool gadgets (which is now a direct competitor for status money).

Example #2: Cars Vs. Facebook
Second, let’s look at young adults and cars. An article in the January 16, 2012 issue of the Detroit News talked about how a shift was hurting cars sales with youth. According to the article, cars used to be a key way for teens and young adults to satisfy their need for freedom, a way to get away from parents to be with friends. It fit that position well. However, recent research has shown that more than half of this consumer group now would actually rather meet up with their friends in cyberspace than face to face. The car is no longer needed to obtain the freedom they want.

In the article, John McFaland, senior manager for global marketing at Chevrolet said, "There's simply new and better and, frankly, more efficient alternatives to communication and getting that freedom that [young adults] used to rely on the auto industry to provide."

The car was losing out at being the best alternative for freedom to the internet. You cannot make minor modifications to a car and make it a superior Facebook. The auto manufacturers needed to consider taking a new position.

The article says that GM decided to shift its young adult position from being the powerful symbol of freedom to being the more practical way enable you to do things with friends. The new emphasis is on practicality and fuel economy, not flash or power.

Example #3: Malls Vs. Words with Friends
There was a time (especially back in the 1980s), when people loved to spend hours and hours every week in the shopping mall. Why? It was the best solution at the time for social entertainment. You could hang out with friends at the mall and be entertained by window shopping, eating in the food court, playing games in the arcade, and people watching.

Now, there are far more efficient ways to have social entertainment. Between You Tube, Netflix, home entertainment centers, 300 channels of cable TV, Facebook, and apps like Angry Bird, Farmville, or Words with Friends, you can have a lot better social entertainment by staying at home. The old mall arcade is inferior to the X-box in the living room.

Malls are left with only the primary function of being a place to buy something. And even there they have lots of competition from stay-at-home shopping options like Amazon. That is why the mall industry is in so much trouble today. Can malls take back the position of being the best social entertainment site from today’s digital home? I doubt it. They need to look elsewhere for a position of superiority.

So What Should Strategists Do?
Given this dilemma, what should strategists do? First they need to look ahead to see if shifts are starting to make your solution to a problem inferior. Is a wholly different offering starting to replace your offering as the best solution? Are you the clothes losing out to gadgets, or the cars losing out to Facebook, or the malls losing out to smart phone apps?

If that is beginning to occur, then one needs to make a choice. Do you:

a) Change your offering to recapture the solution? or
b) Shift your offering to meet a different solution? or
c) Sell out quickly, before the shift has made you obsolete.

Although basic, core needs and desires never go away, the way people satisfy them changes over time (like getting freedom via the internet instead of via a car). As a result, your offering, which may be best positioned to satisfy that need now, will eventually fall out of favor. Usually the replacement is not a minor variation of the past, but a radically different offering. Thus, it may be difficult to change enough to recapture your position. The better alternative may be to either find a new position/solution or to sell out before the shift fully takes place.

Movies often do a great job of capturing the culture of the time. However, if you look at that movie decades later, it can seem so out of touch with today’s culture that it is laughable. I remember laughing at an old movie where a teen got status and was the envy of the neighborhood because he was one of the first to have the old Atari game and could play Pac Man. Now, such a teen would be laughed at as out of date rather than be seen as having superior status. If you don’t want your business to be laughed at as out-of-date, then keep modifying your offering to be more appropriate for the times.


  1. Gerald Nanninga,

    This is a brilliant post. Let me quote you first "The type and brand of smart phone or digital pad became a stronger driver than the brand of jeans. Just watch the status buzz when a teen has a newer, better gadget than their peers".

    One of my university student did just that post to his graduation. Instead of selling smart phones he opted for renting them for a while. Because smart phones change very rapidly, the youth could not afford to buy them,or afford not to impress their peers and lovers. Renting them was a much cheaper option. After renting the phone few times it was offered for sale at a discounted price. The business is very profitable. Those who care for status got what they want and those who care for cheaper prices also met their needs.

    Yes, strategy must adapt to changes

  2. Ali Anani;

    If the demand is high enough, someone will find a way to exploit it. I love your story.