Wednesday, September 19, 2012

Emergent Vs. Positioning (Part 1)

With today’s blog, we will begin a two-part look at a comparison between the Emergent view of strategy and the Positioning view.  In this first part, I will explain why I prefer the positioning view.  In the next blog (part 2), I will explain why I think the emergent point of view also makes some good points and how to incorporate them into a positioning framework to get the best of both worlds.

In strategic planning, there are two dominant philosophies, commonly referred to as the Emergent and the Positioning philosophies.  They are based on different assumptions and result in different strategic activity.

The Emergent view is that the world is in constant change, so if you want your company to be relevant, you have to keep changing to find your place of relevance within that changing world. In the emergent point of view, building a strategy is not a goal but an outcome from your series of actions taken in order to fit into the marketplace of the moment.  Over time, if you focus on the right series of moves on a near-term basis, you will end up with long-term relevancy (and that result becomes your strategy).  In other words, the strategy emerges out of the focus on actions.

With the emergent point of view, the key role of a strategist is to understand how the market is shifting and to identify the evolving “sweet spot” within it.  Then the strategic path is to try to get to the sweet spot faster and better than the competition.

The Positioning view is that winning long term comes from superior differentiation.  The only way to achieve superior differentiation is by making tough choices about trade-offs.  In other words, the only way to get a sustainable edge is by freeing up resources due to minimizing the factors one trades away in order to double-down with the higher level of resources needed to create superiority at point of differentiation.  And the only way to know which trade-offs are the right ones to make is by predetermining the position one wants to own—where the superior differentiation is to occur.

With the positioning point of view, the key role of the strategist is to help determine which position provides the best chance for success for your particular company/brand and then help the company make the right trade-offs on a near-term basis in order to achieve and reinforce that position.

I lean more towards the positioning point of view, and here is why:

1) Getting the Customer’s Attention is Tough
The world is cluttered with information and distractions.  It is hard to compete with all of that to get the customer’s attention.  By emphasizing a position over the long-run, I believe you not only have a better shot at getting the customer’s attention, but getting the customer’s business. 

When you own a position, a consumer knows where to slot you in their mind.  They associate your brand with a word, like “energetic”, “trendy”, “durable”, “easy-to-use”, “long-lasting”, etc.  This makes your brand easier to remember and easier to understand.  There’s too much clutter and demand on people’s time to expect them to figure it all out if it isn’t easy.  They have more important concerns.

Positions can also give your brand a personality.  And this is important, because people tend to purchase the brands which have a personality most similar to their own (or the one they aspire to). 

If you ignore positioning and just move around from sweet spot to sweet spot, you confuse the customer.  They are not sure what you stand for or why they should prefer you over the alternatives.  And when customers get confused, they tend to forget you.  That is not the way to build a strong and loyal following.

2) It’s Easier to Win in Uncontested Space
If you are are chasing after the sweet spot in the marketplace, there is a good chance that a great many others will also be chasing after that same sweet spot.  It becomes quite a competitive battleground.  And as we all know, markets eventually consolidate to only a small handful of winners.  Most of the challengers become short-lived failures.  Why pursue an approach where the odds of success are so small?

By contrast, positioning looks for ways to differentiate.    Rather than chasing the same spot as everyone else, it sets itself apart.  As I say in my book Eight Questions, a good position is desirable, sizeable, ownable, preferable, achievable, believable, understandable, and profitable.  One of the keys is ownability—a position which nobody else owns.  It belongs to you.  It is your word or personality.

When you own a unique position, it is like competing in uncontested space.  Everything is easier.  You can focus on making money instead of fighting hoards of competitors.  Long-term ownership of a position requires that focus on trade-offs that comes from a positioning perspective.

Why battle everyone else for the same sweet spot when there is the uncontested alternative?

3) It’s Difficult to Win a Battle When You Bring No Advantage
Because the emergent view downplays creating unique advantages via focused trade-offs, it doesn’t bring much to the battle.  All you can hope for is to be a little faster and a little better than all the others trying to do the same thing.  And even if you can attain this, it tends to be a very fleeting and short-lived phenomenon.  Someone else will likely be a little faster or a little better with the next iteration.   As a result, the emergent approach tends to put you in one of the most competitive places while providing very little reason for why you should have an advantage over any of those competitors.  Just trying to work harder than everyone else is not a very bankable strategy for the long haul.

By contrast, positioning tends to put you in a less competitive spot with more tools for winning the battle.  Trade-offs create business models with inherent advantages at the point of differentiation.  This makes it harder for others (without that same model) to match you at that point of differentiation.  This increases your chances of winning.

4) Profits Come From Efficiency, Not Bribery
If you have no inherent advantages to bring to the battle, then you have to resort to what I refer to as “bribery.”  My definition of bribery is creating inducements to get customers to prefer you when you have no natural advantage.  This would be things like significant price cuts or adding extra goodies to sweeten the deal.

There are two main problems with this type of bribery.  First, it is easily copied.  The advantage is fleeting because the copiers negate the advantage.  You end up in a price war.  This leads to the second problem—bribery significantly reduces profitability.  It transfers the advantage to the buyer rather than the seller.

By contrast, positioning gets a company focused on perfecting numerous trade-offs moving in a similar direction within a business model.  This consistency improves the efficiency of the business model.  And as the model becomes more efficient, two things happen.  First, you get even stronger at your point of differentiation, so you have a greater natural advantage.  Hence, there is less need to resort to bribery.  Second, the efficiency and the trade-offs provide more cash to apply to any price war.  However, if your position is strong enough, you can probably get way with having a small price premium (people will pay more is the preference is strong enough).

Example:  Microsoft Vs. Apple
Although you can find good and bad examples for each approach, I am going to use Microsoft and Apple to illustrate why I prefer the positioning approach.

Microsoft has used more of an emergent approach over the years.  When they see a particular space get “hot,” they jump to try to become a part of it.  Examples:  When AOL and Netscape were hot, Microsoft jumped in with MSN.  When game players were hot, they jumped in with the X Box.  When iPod-like devices were hot, they jumped in with Zune.  They’ve dabbled in all sorts of other non-computer computing devices over the years.  When search got hot, they invented Bing.  And now that the cloud is hot, they are putting their effort there.

In the process, Microsoft hasn’t built up any strong position.  They haven’t created much of any natural advantages.  They haven’t made consistent trade-offs.  And for the most part, they haven’t created many winners.  About the only advantage they brought to the game was deeper pockets, due to their cash flow from Windows and their business-oriented software.

The sad part is that while they were chasing sweet spots, Microsoft did not meaningfully enhance their original strengths in business software.  With the cloud, that business could be at serious risk, as people stop buying software and use competing cloud services. 
By contrast, Apple stayed on a narrower path, thanks to positioning.  They knew what position they wanted to hold—cool, elegent devices combined with proprietary software and services which were easy to use and worked seamlessly.  Apple made the necessary trade-offs in their culture and investments and business model to accentuate this position.   This gave Apple a natural advantage and customer loyalty strong enough to allow them to charge premium prices and still win.

Microsoft has lost market value while Apple has soared to become the highest valued public company.

The strategic planning discipline has developed two different schools of thought on what strategy should be.  These are the positioning school and the emergent school.  I prefer the positioning school, because:

1)      Getting the Customer’s Attention is Tough Without A Position

2)      It’s Easier to Win in Uncontested Space (Which is more likely to occur with a good position).

3)      It’s Difficult to Win a Battle When You Bring No Meaningful Advantage (Which often happens with an emergent approach).

4)      Profits Come From Efficiency, Not Bribery (Positions tend to lead to efficiency, emergent tends to lead to bribes).

Although I prefer the positioning point of view, the emergent perspective is not without some merit.  It makes many good points.  In the next blog, I will talk about how to incorporate some of the emergent contributions into a positioning framework.

1 comment:

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