Strategic Planning Analogy #462: American War-Idol

THE STORY
Imagine what would happen if military warfare shifted from the field of battle to a TV reality talent contest, like “American Idol.”  Victory would no longer depend on direct combat with the enemy.  No, the victor would be determined by how many in the TV audience vote for a particular army.

Instead of direct combat against each other, each army would perform a military exercise separately.  They would show off their talents at warfare skills. Then the TV audience would vote on which army appeared more skillful. Like on those singing talent TV shows, the singers rarely go head to head in combat.  They just sing their songs and hope the audience prefers their performance over the others.

If this were the case, then the whole idea of warfare would have to change.  Instead of focusing on the best way to physically defeat the enemy, the goal would shift to focusing on the TV audience.  Gaining votes from the viewers becomes the name of the game rather than the old measurements of territory won or lives lost.

I suppose this would cut down on the bloodshed, but it would require a radical rethinking on how to do the act of war.

THE ANALOGY
A lot of the terminology in strategic planning is borrowed from the military.  There are strategic campaigns, strategic attacks, competitive enemy assessments, and so on.  In fact, a lot of the beginnings of business strategy borrowed heavily from military thought.  Military books like “The Art of War” are often placed on the recommended lists for business leaders.

But I think we need to ask ourselves an important question.  Is the modern game of business more like the traditional military, or more like those singing talent shows on TV?  This is an important question, because the way you approach winning under these two scenarios is quite different. 

As we saw in the story, traditional warfare is about direct confrontation with a foe.  The focus is on overpowering the enemy with superior force.  On the TV talent contests, the confrontation is much more indirect.  Yes you still have to overcome a foe, but the decision is made by the audience.  In this case the focus is on wooing the audience.  The enemy is overcome by superior popularity with a third party.

In the modern world of business, the losers go bankrupt while the winners create cash flow.  And where does that cash come from?  It is not like the old traditional warfare or pirate warfare where you would conquer the enemy on the field of battle and then take their wealth as “the spoils of battle.” 

No, it is far more indirect in the business world.  You get the cash flow primarily from people buying your goods and services—your CUSTOMERS, not your enemy.  Yes, you have to convince customers to spend their money with you rather than your competition.  But that is an indirect assault on the competition.  This means that the real battlefield is not where the competition is, but where the customer’s mind is at.

Hence, victory in business today appears more like the American Idol TV show than old war battles.  You focus on trying to get the “votes” of the audience (customers vote mostly with their money in business) rather than directly vanquishing the foe. 

In fact, this trend appears to be getting even greater.  First, thanks to the social media, the customer is becoming even more powerful in determining the winners and the losers.  Second, governments are still legislating and prosecuting to protect companies from direct “anti-competitive” moves on other companies. 

So, direct confrontation is getting legislated away while the voice of the third party consumer is becoming more influential.

Therefore, if you want to get ahead in business, it may make more sense to put away those books on war and start watching more talent contests on TV.

THE PRINCIPLE
The principle here is that your strategic thinking may need to deemphasize the competitive warfare principles and embrace more of a talent show mindset.  In other words, you may need to fixate less on the competition and more on the consumer.

Too much of a fixation on beating the competition can have two major drawbacks.

1.  Too Much Focus on Improving the Status Quo Rather than Seeking Superior Consumer Solutions.

Consider the epic battle in the last century between Kodak and Fuji in the analog film business.  Each was focused on trying to beat the other.  First, a lot of effort was put into trying to have a superior film product over the other.  For a short period of time Fuji would be ahead of Kodak in quality and then Kodak would make a leap to superiority and so on.

Second, serious effort was spent trying to get superior product distribution over the other.  Finally, there was the battle over value/price.

And we all know what happened.  Customers abandoned the category and moved to digital imaging, making Fuji and Kodak both losers in imaging.  All that effort to have superiority over the rival in quality, distribution and value ended up being meaningless.  It didn’t matter who won the direct battle between Fuji and Kodak for superiority in analog film.  If the consumers stop voting for the category, the victory is very hollow.

I had a friend who worked in the US beer industry decades ago.  He would talk about the intense fixation in top management at Anheuser Busch and Miller at that time to try to destroy each other.  Each spent a fortune to try to get an edge on the other in the US market.  All the while, imports and micro-breweries were stealing the hearts of the customers.  AB and Miller were so weakened by the shift that they each had to seek shelter by selling out to larger international firms.

The point here is that the intense competitor fixation is usually placed on competitors doing pretty much the same thing in the same way in the same industry.   It is based on the current status quo and the goal is to be the best at doing what the status quo does.

The problem is that consumers shift, causing the status quo to become severely weakened or obsolete.  While you are staring at your status quo enemy, you miss the competitor of the future who is now only a blip on the horizon.  You miss thinking outside the box to find advantages that have nothing to do with superiority within the status quo competitive system.  Worse yet, you miss out on time that could have been focused on understanding the mind of the customer better (where the real voting takes place).   

Rather than building superior solutions for the consumer, you end up building superior obsolete products. Just because you beat up your enemy doesn’t mean the customer wants you.  A better version of a no longer desired solution still loses the war for votes.

2.  Missing Out on Peaceful Coexistence Options

Another important point is that you can win the hearts of the customer without having to completely destroy the competition.  Many of the losers on the American Idol TV show still went on to have successful singing careers.  Winning on the show did not mean everyone who did not win had to fail.   They could peacefully co-exist in the entertainment marketplace by appealing to different audiences.

This is very true in the business world.  If your strategic position is significantly different from another firm, you can both win by appealing to different segments.  For example, one technology firm can win in the consumer space (like Apple) where another find success in the business space (like Microsoft).   Or one brand can focus on the high-end luxury business while another focuses on the masses.

The idea is that rather than focusing on outdoing a competitor at the same thing, one can often be more profitable leaving the competitor alone and going in a different strategic direction.  In a head to head competitive battle, your advantages tend to be very temporary, because the enemy fights back to gain its own advantage.  In addition, price wars against each other wipe out the profits from any temporary advantages.

By contrast, if you ignore the enemy and go a different way, your efforts can be placed behind more dramatic and more lasting points of differentiation—because the whole strategy is based on being different rather than trying to be better at the same thing.  And with a stronger differentiation, there is less need to resort to price wars.

Strategy is about choosing the right tradeoffs—doing less of one thing so that you can do more of another.  If you choose different tradeoffs than the competition, then you sort of cease to really even be in competition any more.  So long as there is a large enough audience voting for your version of the tradeoffs, you can almost ignore that other company and just focus on being better at your point of differentiation.

If Apple had continued to try to beat Microsoft in traditional computing, it would have died a long time ago.  However, by repositioning itself in an entirely new business model, Apple could win while not having to really worry about Microsoft anymore, because they were no longer in direct competition.  Instead it had the luxury of just focusing on getting better at its point of differentiation (and make a lot of money doing so).

 

SUMMARY
Excessive focus on beating the competition can hurt your chances of success because it takes focus away from areas which can create consumers to spend more money with you.  In particular, it focuses one too much on the status quo, rather than on the superior business models of the future (which typically come from someone who is not a current competitor).  Second, money and effort is wasted on trying to outdo the competitor at the same thing rather than creating more lasting and more profitable superiority through differentiation in positioning.  Remember, the money comes from the customer, not the enemy, so focus on where the money is.

FINAL THOUGHTS
Even the military is starting to adopt more a TV talent show approach to warfare.  The turning point for the US in the war in Afghanistan came when less focus was placed on out-muscling the enemy and more focus was placed on pleasing the citizens living there.  By building roads and schools and other initiatives, the citizens started liking the US more.  As a result they gave less shelter to the enemy of the US, allowing the US to gain more victories.  If even the military is moving in this direction, shouldn’t you?

Strategic Planning Analogy #273: The Back of the Coin

THE STORY
If you take a coin and hold it close to your eye at a perpendicular angle, it no longer looks like a coin. All you see is the edge, and the edge looks like a straight line. It is only when you change the angle in which you look at it that you can see it is a circle.

I’ve used this concept to help explain some of my political observations. In the political world, people like to describe things on a one-dimensional line. At the left end of the line is liberalism. On the right end is conservatism. People are judged politically by where they are on that line—left, right or center. The thinking is that the further you are to one of the extremes on this line, the further your political thinking is from those folks on the far other end of the line.

However, in my observations and discussions with the really radical extreme conservatives and liberals, I see something different. The really radical extremes on both ends start looking more similar to each other.

- Both tend to highly question the abilities of the general public to be able to comprehend the “truth.” They do not trust them to make good choices.
- Both tend to have little faith in current political system to solve problems and are willing to take drastic steps to bring down the status quo.
- Both seem more inclined towards the idea of benevolent dictatorship (although they may define benevolence a little differently).
- Both tend to use populist rhetoric.

This is where the concept of the coin comes in. As you move further to the extreme on the political line, what you are really doing is moving along the edge of a coin. As you get more extreme, you start moving around the edge of what you see to the back of the coin. As a result, the radical, extreme elements of both conservatism and liberalism are so extreme that they are both moving to the back edge of the coin, and moving in a direction where they are now getting closer to each other.

In other words, politics is not on a line, but on a circle. We just can’t see it because we are looking at the coin from the wrong angle.

THE ANALOGY
In the business world, we also like to position ourselves as being on a one-dimensional line. However, instead of using the terms Liberal vs. Conservative, the extremes on our line could be:

Low Price Vs. High Service

Mass Vs. Niche

Multi-Purpose Vs. Specialized

Fashionable Vs. Pedestrian

High Quality Vs. Low Price

Efficient Vs. Customized

With this mind-set, we position one extreme against the other. The idea is that if you become more of one end of the continuum, you are by necessity less of the other. In other words, the more mass you are, the less niche you can be; or the lower your prices, the worse your service or quality needs to be. It becomes an either/or proposition.

This mindset is like looking at the edge of the coin. All you see are linear opposites.

But what if we change our perspective and look at the entire shape of the coin? We may find that if we throw away conventional thinking and get very radical, there may be a way to get to the back of the coin, where both extremes can co-exist. The “either/or” becomes a “both/and.”

Maybe there is a way to be both mass AND niche, or to provide high service AND low prices. All we need to do is find a path to the back of the coin.

We, as strategists, need to sometimes look at things from different angles, so that we can see possibilities that appear impossible from the original point of view. We need to change from thinking lines to perhaps thinking circles.

THE PRINCIPLE
The principle here is that so-called opposites can possibly co-exist successfully if we take a more radical approach to how we look at things. We will illustrate this by looking at a handful of U.S. retail companies.

1) Home Depot
The thinking in the hardware/home improvement industry used to be that one could either be high service or low price. You could not be both. This was the conventional linear thinking.

In the late 1970s Bernie Marcus and Arthur Blank started looking at things differently. They could see a circle, where low price and high service could co-exist. To do so, they had to get radical and rewrite the business model for the industry. Rather than small departments in a low price discount store or small, high service hardware stores, Marcus and Blank built huge stores that encompassed every imaginable home improvement need.

The large stores created enough demand and efficiency that they could offer unheard of low prices and still have money left over for high service. The early stores were staffed with former hardware store owners and part-timers who still worked in the skilled trades of plumbing, painting and the like. They even held seminars to teach the skills to the customers.

Bernie and Arthur had found the path to the back of the coin, where low prices and high service could co-exist. They called it Home Depot. It was very successful.

Unfortunately, when Robert Nardelli took over as CEO of Home Depot, he returned to linear thinking. He wanted to lower prices, so he cut back on service, thinking that to get one (low price), you had to cut back on the other (high service). This point of view severely damaged the prospects of Home Depot during the past decade. It wasn’t until Nardelli was replaced by insider Frank Blake (who understood the back of the circle) that things started to turn around. Service returned, and so did market share.

2) Amazon
Jeff Bezos used the internet to rethink a lot of the old linear ideas in retailing. Through the creation of Amazon, he was able to develop a mass retail site that had every imaginable customization tool, so it could also cater to every conceivable niche. Both mass and niche feel comfortable using Amazon.

Because of the efficiencies of internet technology, Bezos made Amazon both a slick, efficient low cost operator as well as a high service operator, providing recommendations, reviews, wish lists, easy ordering, and so on.

All of these services and customizations came with the convenience of shopping at home 24 hours a day. Yet, at the same time, Amazon was able to provide very low prices. Never before had so many linear “opposites” successfully coexisted in a single retail brand.

Jeff Bezos used the internet as a tool to radically redefine what one can do in retail. He saw the circle and got to the back of the coin, where all these so-called opposites come together. To Jeff, the internet was not just another place to do conventional retailing. It was a tool to redefine retailing.

3) Target
Target is known for its “Cheap Chic” image. Before Target, no retailer would have considered the combination of cheap and chic. These were supposed to be linear opposites. However, Target was originally owned by a sophisticated department store company which understood fashion well. This background gave them a different perspective as to what was possible.

By taking some of the tools from department stores and some of the tools of discount stores, they were able to fashion a new type of store which could provide both chic and cheap. They got to the back of the coin.

Once Target showed that you could have both, another wave occurred. By using the radical supply chain innovation of “fast fashion” (small batches of Apparel knockoffs made quickly—while the fashion is still hot—and sold quickly—without markdowns), chains such as H&M, Zara and Forever 21 are also finding a way to combine cheap and chic.

SUMMARY
Sometimes the way we look at a problem limits our ability to find the solution. If we see attributes as linear opposites, it is hard to picture them as successfully co-existing. However, if we are willing to change the angle we use to look at problems (and are willing to consider radical departures in our business model from the status quo), we can find ways to combine these so-called opposites into a hugely successful strategy.

FINAL THOUGHTS
Almost everything about the way we live and think today was at one time considered a very radical departure from the status quo. Therefore, don’t be afraid of thinking radically. All you may be doing is just redefining the future status quo.