THE STORY
In the wintertime, Minnesota can have some nasty snowstorms.
If they come just before the rush hour commute, they can grind traffic on the
highways to a stop for hours. When that would happen to me, I would get off the
highway and try to make my way home via the back roads.
With everything covered in white (and even more coming
down), it would be hard to see where you were driving. And if the back roads
took you into unfamiliar territory, it would be even more difficult to know how
to get home. Therefore, when I got onto the back roads under these conditions,
I would try to find another driver who appeared to know what they were doing
and then follow them.
On one of these evenings, I found a car that really seemed
to know all the back road shortcuts, so I started to follow it. Everything was working
out quite well until that car I was following suddenly turned up a driveway and
went into its garage. It was home. I was not. And I really wasn’t very sure
about where I was.
I just kept driving and luckily I soon came to a main road
which I recognized. From there, I was able to find my own way home. If I hadn’t
come across that familiar road, I might have been wandering aimlessly out in
that winter storm for many additional hours.
Following someone can make life a lot easier—so long as the
person you are following is going to your destination. But if that person is
going somewhere else, they can lead you in the wrong direction.
When that car I was following turned up its driveway, I was
in big trouble because he had led me into a neighborhood I did not know and
where I did not belong. He had reached his destination. Unfortunately, his
destination was nowhere near my destination. I was left in a place where I was
lost.
The same thing can happen in the business world. It is
usually easier to follow someone else’s strategy than create one of your own.
This seems easy to justify, especially if you are following the market leader.
After all, that strategy made them a huge success. Won’t it do the same for me?
The problem is that they are the market leader and you are
not. They have different capabilities and resources than you do. As a result,
the right strategic destination for them is most likely not the right
destination for you. Trying to win with a strategy designed to take advantage
of someone else’s strengths (not your own) will lead you to a place where you
do not belong.
But even if you are roughly similar businesses, it is
usually a mistake to blindly follow the leader. After all, each strategic
position can only be owned by one firm in the mind of the customer. If the
leader already owns that position, then the customers will view you as an
inferior version of that position, even if you do essentially the same
strategic actions. Instead, it is usually better to find your own unique position
(where you can win) than to be seen as an inferior copy of someone else’s
position. In other words, you need to find your own home to drive to rather
than follow the leader to their home and not be invited in.
A great example is Walmart versus Target. Walmart’s
strategic destination was “lowest cost structure/lowest prices.” Target could
have tried to follow Walmart with a similar approach, but it probably would
have been a failure. Just look at the evidence. There used to be dozens of
discount store chains in the US chasing Walmart which have all gone bankrupt. But
Target is still going strong because it decided not to follow the Walmart
strategy and went to a different destination.
Target’s heritage from its parent company was the more
upscale, more fashionable department store business. This was an advantage they
could leverage against Walmart. So Target chose the destination of “Cheap Chic,”
the more upscale, more fashionable alternative to Walmart.
Being a desirable alternative to Walmart is much better than
being an inferior Walmart clone. Both chains now could successfully coexist, because
they were winning in their respective, differentiating positions. They had each
chosen different strategic “homes” and took different paths to get to their
homes.
The principle here is that a strategy of following someone
else is usually a mistake. Most of the time, it is better to develop a
different strategy—one specifically suited to your unique situation (skillsets
and market position).
Why Following is
Usually a Mistake #1: Differences
We have already discussed many of the reasons why following
is usually a mistake. First of all, every company is different. There are
differences in capabilities, resources, corporate culture, geography, prior
investments, product portfolio, patents, market perceptions, and so on. What
works for one firm won’t work for another because of these differences. You
need to choose your strategy based on what makes you unique, because it is your
uniqueness which provides the competitive edge needed to win.
There is no single best strategy for everyone in an
industry. If there were, we’d be in trouble, because then you would only need
one company per industry—the one best at executing that single strategy.
Fortunately, there are many different ways to win a segment of the industry.
You can choose to win on a variety of attributes, like price, service,
customization, quality, speed, or specialization to a particular segment (such
as a particular customer segment, geographic segment, usage segment, or
solution segment). Rather than imitate someone else, find the place among these
options which is best for your unique situation.
Throughout history, there have been business leaders who
have had a great reputation for success. At one time, it was Jack Welch at GE.
More recently, it was Steve Jobs at Apple.
Each time one of these business superstars appears, I’ve seen many
leaders trying to implement the identical leadership styles (and strategic
approaches) of these superstars in their own businesses. They try to follow
these leaders just like I followed that car in the Minnesota winter. And
usually, the results are similar to my experience. They end up lost rather than
having success similar to these superstars.
Why? Well, the personality style of these superstars may be
different than the natural style of those trying to imitate them. That
difference makes it hard to be genuine and effective with that unnatural style.
In addition, you are placing that leadership style into a different context.
That style may not be the best for that context. These differences can make
following these superstars a mistake.
Consider the fact that even Steve Jobs was not incredibly
successful everywhere he went (think about when he ran NeXT). And many of the
people highly trained at GE in the Jack Welch style had unsatisfactory results
when they left GE to run companies in a different context. If they couldn’t
pull it off when the situation is different, why do you think you can? Differences matter and can make imitation
inappropriate.
Why Following is
Usually a Mistake #2: Only One Leader at a Time
Another problem with following has to do with the laws of
positioning. As Al Reis and Jack Trout pointed out in their works on positioning,
consumers will mentally place only one firm as a leader in a particular
position. Everyone else is seen as inferior. And once someone locks into that
leadership position, it becomes extremely difficult to unseat them from that
top position. As a result, Reis and Trout recommend that if you are not the leader
in a particular position, go and find a different, uncontested position where you
can win.
This is like when Target did not try to unseat Walmart from
its position but found a different place where it could win. Another example
would be social networking where anyone essentially trying to copy the success
of Facebook (like Google+) is failing. However, Linkedin differentiated by
going after a different customer segment (business professionals) and has done
well.
There was a time, generations ago, when industries held more
financially viable players for a given position. But due to consolidations, the
power of networks, price wars, and greater transparency, the number of
profitable players in a given position keeps shrinking. Often, only one player
per a given position makes a respectable return on investment. If you are not
the top player in your position, you will probably be a poor investment. So,
instead of copying someone else’s position, find a different place where you
can win.
Exceptions to the
Rule
Does this mean that following is always a bad idea? No,
there are a few situations where following is okay. One such situation is when critical mass is
needed to get an industry started. For example, when the next generation of
DVDs was being developed, there were two competing technologies—Blu Ray versus
HD-DVD. This created uncertainty in the marketplace. Customers were reluctant
to purchase either one for fear that they would choose the wrong format. It
wasn’t until the players in the supply chain (movie studios, media player
manufacturers, retailers, etc.) started following each other in one direction
(Blu Ray) that the critical mass was formed to get customers to buy.
Another example could be electric cars. Until consumers are
comfortable that the right technology is found (and the compatible charging infrastructure
for it is in place), they will hesitate to buy.
This is similar to the Blue Ocean strategy which talks about
abandoning the status quo to open up entirely new industries. Sometimes you
need a critical mass of players following each other into the new blue ocean in
order to make to new industry look real and viable. If the new market is big enough, it may be
worth following to get the market jump-started.
Another time to follow is when an industry is still
developing and you have special leapfrogging skills. The idea hear is to let
others test the waters of innovation and take all the risks of failure. Then,
when they hit upon the rare success, be a fast follower and overtake them in
the race for leadership. This has been the strategy of Coca Cola for decades. Coke
lets other people invent markets (like diet cola, cola in cans, bottled water, sports
drinks, energy drinks) and then they use their superior distribution skills to
overtake the upstarts and dominate the new business. As long as an industry is
still unsettled, the fast follower approach can work if you have the
capabilities to outrun the innovator.
However, even in these two cases, the benefits of following
are temporary. Eventually, the markets will mature, and following won’t work
anymore.
Although following someone successful may seem like a path
to similar success, history would say otherwise. The followers usually lose
because either:
a)
They are in a different situation than the leader which
makes their strategy not applicable; or
b)
The leadership in that position is already owned by the
leader and you cannot take that leadership advantage away from them.
Therefore, rather than follow someone else, find the unique
path that is just right for you.
Eventually, I mapped out my own back roads for when a storm
hit in Minnesota. That way, when the storms came, I was following my own path,
rather than the path of someone else. That worked out a lot better. You should
do the same.
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