Strategic Planning Analogy #267: It Must Be Better

THE STORY
Many years ago, there was a comedian who specialized in doing impersonations. Now, it used to be that a lot of comedians did impersonations. This comedian, however, put a unique spin on the genre. He specialized in doing impersonations of people who died long before the invention of recorded sound.

For example, he would do impersonations of people like Abraham Lincoln or Aristotle. It was interesting to watch, but was it accurate? I have no idea what Aristotle sounded like or what his mannerisms were. For all I know, this comedian could have it all wrong and not even be close.

But in the end, I guess it doesn’t matter. Since nobody else knows what Aristotle sounded like or acted like, nobody could challenge the accuracy of the impersonations. As long as the comedian was funny, the audience would accept his impersonations. It was those other comedians, who did impressions of people we knew, who were more sharply critiqued (“Hey that’s not what John Wayne sounds like”).

THE ANALOGY
When nobody knows what truth is (and nobody is able to discern the truth), then nobody can effectively challenge your position. This was the situation the comedian was in. Nobody knew what those ancient people sounded like or acted like, so the audience could not challenge the comedian’s impression of these old people. They just sat back and enjoyed the show.

However, if someone is doing an impression or imitation of something you are very familiar with, then the criticisms come flying. You know what “truth” is because you have experienced the real thing. Any variation from the real thing will be noticed as a flaw or defect. Rather than just sitting back to enjoy the show, you compare the imitation/impression to the reality (as you remember it) and get upset if the imitation does not live up to your expectations of what truth is. You’ll shout something like, “I know what John Wayne sounds like and acts like, and that was not it!”

This situation is similar to what happens in business. In product development, you have one of two strategic choices: either create something totally new, unlike anything else in the market OR create a “me, too” product that is a variation of something which already exists.

The first choice would be like our comedian, who did impressions that were totally new to you (you had never heard the voice of these people before—you have no reference point). Similarly, totally new products have no reference point—what you invent defines the category. It is accepted as authentic and people enjoy it for what it is.

The second choice (offering a “me too” product) is like comedians who do impressions of people we are very familiar with (you have a reference point). You are more critical, because you have a benchmark to compare it to. Any variance from the original reference point makes your product less “authentic.”

THE PRINCIPLE
The principle here is that the less the familiarity, the greater the acceptance. Therefore, if you blaze new trails in product development towards areas unfamiliar to your customers, your development efforts have greater potential for acceptance.

We could see this principle at work in the comedian story. We are more forgiving of the comedian going where we’d never been than ones covering familiar impressions with a slight imperfection. I also experienced this principle recently in a restaurant. This was no ordinary restaurant. It was an exotic restaurant specializing in exotic foods which I had never eaten before. Heck, I couldn’t even pronounce the words on the menu, let alone understand it.

When the food came out, I had no preconceived notion as to how it was supposed to taste. I had never eaten anything like this before. Some of it tasted fine. Some of it tasted very odd to me. But since this was a nice restaurant with a good image, I assumed they were all supposed to taste like that. It never occurred to me that the dishes might be prepared wrong. They supposedly had excellent chefs, so I just took it for granted that these concoctions were supposed to taste that way—even if I didn’t like it.

But what if I was wrong and the food really was prepared poorly? What if this really was bad tasting food? I wouldn’t know. So I was satisfied, whether it was right or wrong, because I didn’t have a pre-conceived notion of what “good” would taste like. I just sat back and enjoyed the dinner.

Now if this fancy restaurant had served me a hamburger, I would have had a reference point. I could have complained if their gourmet burger drifted too far away from my concept of what a hamburger is supposed to look like and taste like. But they did not offer a “me too” burger. They offered me a taste of the unknown. A taste of the unknown is always yummier than an off-beat version of the familiar.

You can also do this at the low end of the restaurant spectrum. Quiznos has had great success with their $4 Torpedo. The beauty of the Torpedo is that it is so unlike anything else out there that there is no reference point to tell if it is a good torpedo or a bad one—so you accept that it is a good one, and worth the $4.

Quiznos knew that having a $4 item on their menu would be a key to success in this recession. They could have lowered the price of their familiar regular sub sandwich to $4, but that would have caused problems. First, once you lower the sub to $4, there is an expectation that $4 is now the right price for that sub. It would be difficult to raise the price back up later without ruining the new perceived value. Second, the regular sub is not designed to work in the business model at $4. Either you have to cheapen the sub (which would be noticed, since people were familiar with it) or you have to lose money on the deal.

By contrast, the Torpedo was designed to work in the business model at $4. It wasn’t a “cheapened” anything, since it was brand new. Sure, it had less meat than a regular sub, but the Torpedo never was a regular sub and was not expected to be one. It was a Torpedo, and this is how Torpedos are supposed to be. They had never been anything else. A strategic piece of genius!

So what does this mean for your strategy?

1. It is almost always better to create something brand new, where you can define the parameters of success, than to copy someone else, who has already defined success (as being them). When you control how a product is defined, then you can define the perfect product as the one you are offering. Apple has been very good at this.

When Toyota invented the Prius, they made a brand new car which defined what a hybrid is supposed to be. After that, anyone else who tried to make a hybrid brand had to be compared to the definition of the perfect hybrid—the Prius. And of course the Prius is the superior Prius, so it wins. Worse yet were automakers who tried to make a hybrid version of a non-hybrid car people were already familiar with. That didn’t work, because their familiarity with the gas hog version biased them against the hybrid version (familiarity made them more critical).

2. When positioning your product, don’t spend too much time comparing it to the status quo product. If you make too big a deal out of the status quo, you are acknowledging its leadership, which makes you an also-ran. People will say, “If you are so good, then why does the status quo have higher sales?” Instead, position yourself as an entirely new way to solve an old problem. There’s just something about saying that “my revolutionary new way is better” which sounds more believable than saying “I’m making basically the same thing as what is already out there and successful, but I’m better.”

3. Sometimes you can get around cost pressures by replacing the familiar with a cheaper unknown which is positioned as a wholly new product. Cheese was getting very expensive, which is a problem for companies like Taco Bell, who use a lot of cheese and want to keep their prices low. But Taco Bell has never been afraid of inventing new menu items nobody has ever heard of. So the new items substituted cheaper cheese sauce for cheese. However, since these were brand new items that never had real cheese in them, it didn’t look like a cheap substitution. It was just how the new item was supposed to be. This is far more successful than if they had taken familiar items and did the substitution. Then, Taco Bell took this cheap sauce and put hot spices in it and invented “Hot Lava Sauce.” So now the cheaper substitute was a unique, premium item in brand new menu items.

SUMMARY
Winning strategies tend to blaze new trails rather than rework the familiar. The revolutionaries get to define the category in their favor and tend to receive less criticism. Because they define the category, they must be right.

FINAL THOUGHTS
Even if your product is not all that revolutionary, that doesn’t mean that you cannot package it in a revolutionary manner. Chrysler was making fairly ordinary trucks, but they were packaged as revolutionary because they had the magic Hemi engine.

Analogy #182: Blueprint for Success?

THE STORY
Once there was a man named Joe who did a very good job of managing an office building. His job was to see that the building and all of its systems were in good operating order. Joe made sure the electrical systems worked, the air conditioning worked, and that the building was secure.

Joe did such a good job in these areas that he got a promotion. In his new job, Joe was in charge of a much larger and much older building.

Joe came to the new building with a large bundle of papers under his arm. The guard at the door asked him what all those papers were. Joe responded, “These are the blueprints of the building I used to work at and the schematics of all of the equipment that was in that building. These papers never let me down in the past, so I expect they will continue to fuel my success.”

“But Joe,” said the guard, “This building doesn’t look at all like the old building…and the equipment inside is a lot older and made by other manufacturers. How are those papers going to help you here?”

“These are the papers I know. I have become an expert at interpreting them. It is because of my ability to interpret these papers that I have been so successful. Why abandon something which has worked so well for me?”

Well, as problems turned up at Joe’s new location, Joe stayed true to his word and relied on the old blueprints and schematics. However, because they were not designed for this building, they gave Joe bad advice. Joe kept putting holes in the wrong walls and destroying the equipment by wiring it improperly.

The building quickly was in worse shape than when Joe started. Joe was fired.

Joe was confused. He knew those were great blueprints and schematics. He wondered what went wrong. Joe finally concluded that the problem was because nobody else in the building was using his blueprints and schematics. If they had just been more like him, Joe concluded, there would not have been any problems.

Joe eventually got another building management job. And guess what…he brought those same papers to his new job.

THE ANALOGY
Joe had been very successful earlier in his career. He attributed his success to following a particular blueprint. Unfortunately, that blueprint is only an accurate representation of one building. If you try to apply that blueprint to a different building, it is not very useful.

It seems silly that someone would rely on a blueprint designed for an entirely different building, but similar things happen in the business world all the time. Many successful business executives move around to new jobs with different companies, often in different industries. When they get to the new job, they bring along the “blueprint for success” which worked so well in the past. All the tricks and dashboards which worked so well before are expected to perform exactly as well in the new location.

Most times, though, there is enough of a difference in the circumstances that the old tricks don’t have the same impact. Differences in corporate culture, customer base, core competencies, reputation, or resources can make your new situation not very similar to the old blueprint of success. As a result, you will be like Joe, putting holes in the wrong locations and destroying the operational systems.

It can be something very simple, like an executive I knew who honed his skills in tough New York City. When he took a job in the more people-sensitive Midwest, his formerly successful tough style failed miserably. His failure to adapt his style to the new culture eventually forced him out of the company.

Other times, it can be subtle nuances to the local business. They are not always easy to detect at first. The companies may look very similar at first blush, but these nuances may be enough to make success in each depend on very different variables. Coke and Pepsi may look similar at first, but they have reached their success in very different ways.
Just because you have some great “blueprints” doesn’t mean that you can just walk into any building and be an instant success.

THE PRINCIPLE
The principle here is that learning is better than knowing. You can know how to do something so well that you can do it in your sleep. But if situations change, the thing you know how to do may no longer be useful. Knowledge has limited applicability to limited situations. Get outside those boundaries and the knowledge is worthless. If you only know one way, and that way becomes worthless, you become worthless.

Better than knowing how is to learn why. Learn why the blueprint is successful. Learn the broader principles behind when the tricks work better or worse. Learn a variety of skills and when they are most appropriate. That way, when situations change, you will understand how to adapt to the change.

Knowledge can lead to cockiness. You may have had great success in cost cutting and become cocky enough to believe that all problems can become solved through cost cutting. Therefore, without deep thought one can approach every problem by rushing to cut costs.

However, some problems can be caused by years of underinvestment. The solution may be to temporarily increase costs through investments in technology or infrastructure.

This idea is similar to the flaw of having only one trick up your sleeve, which we talked about in the blog “Henry the Hammer.”

So. when confronting a new situation, such as a new job or a new responsibility, keep the following ideas in mind.

1. Don’t assume that the strategic tricks of the past will work exactly the same in the new situation.

2. Don’t rush too quickly into action. Take time to learn. Learn the nuances of the business. Learn the culture. Talk to key customers. Talk to the old-timers. Learn how it is similar and how it is dissimilar to situations in your past.

3. Don’t assume that all of the blueprints currently in use by the business are all wrong and that all of your blueprints are all right. The truth is somewhere in between. Remember, the business you are inheriting got as far as it did by doing something right. Learn what that was, before changing it.

4. Don’t be afraid to try new things. For example, if you move to a new company from a competitor and try to do things exactly like they do it at the old place, all you are building is an inferior clone of the old company. The marketplace already has one of those. You need to develop a strategy which is uniquely different, so that it stands out in the marketplace and can own a position of its own for which your new firm is most ideally suited.

5. Just because you may be more comfortable doing things one way doesn’t mean that your entire team can quickly adapt to your way. It may be easier and faster for you to adapt than to get a whole team to adapt. I know of a place that collected a large number of great employees who came there to avoid a particular management style. New management came in and brought the style these people were trying to avoid. As a result, many left the company.

This is not to say that you abandon all of your experience from the past. Experience is a good thing. But the true value of experience is in how well it prepares you to learn and adapt.
Those big consulting companies can sometimes be very useful. They hire very smart people. They’ve been exposed to things you have not seen. However, they do not know the nuances of your business. Therefore, there advice is often rather generic. They can make more money if they quickly push the tricks they know rather than spending time to learn the particulars of your situation. They take the same old power point presentations and just fill in the blank with your company’s name.

These can be clever and useful tricks, but don’t just abdicate all the power to them. Make sure you get them to adapt to your nuances and particulars. Don’t just take what they know. Force them to learn and adapt.

SUMMARY
What works well in one place will not necessarily work as well in another place. Strategy is about exploiting one’s uniqueness in the marketplace. Generic one-size-fits-all strategies will never be optimal. Take the time to learn the nuances.

FINAL THOUGHTS
When it’s time to hire people, do you hire them just for the blueprints they have under their arm, or do you look to see how well they can learn and adapt?

Refrigerator Casserole

THE STORY
I love to cook. However, I could not follow a recipe in a cookbook to save my soul. I always seem to mess up when I try to follow a recipe (I had the same problem in chemistry lab in college).

Instead, over time and through experimentation and observation I have learned how various ingredients tend to work together (or not work together). From this I have just developed a knack for putting food ingredients together.

One of my specialties is what I call “refrigerator casserole.” The way this works is as follows. First I look in the refrigerator to see what ingredients I already have. Then I try to figure out what one could possibly make out of what is at hand. Finally, I put together what is available in the tastiest way I know. Usually, it works out fairly well.

Each time I make it, it turns out different, because what I have in my refrigerator varies over time. But in the end, it is usually quick (didn’t have to make an extra shopping trip) and relatively inexpensive (uses up leftovers in an exciting way).

When my children were younger, they would complain about my home cooking because “it didn’t taste like the stuff that comes in a box.” To them, food from a box was the standard of what something should taste like. Eventually, I must have had some impact, though, because my son eventually went to chef school and now works in the restaurant industry.

THE ANALOGY
Some people see strategic planning as being like following a recipe in a cookbook. It’s one of these “just tell me the eight steps of what to do and I’ll do it” sorts of mentalities. Great strategies rarely come out of “strategic cookbooks.” Sure, there are lots of books out there that claim to have the secret of how to create the perfect business strategy. Just follow their formula and, supposedly, success is assured. But I have not found this to be the case.

Instead, strategy is more about nuance. It’s about understanding who you are and what is unique about what you have to offer. The task is to take that internal uniqueness and find a way to profit from it. In that way, strategy is more like my refrigerator casserole. You look inside your business (your strategic refrigerator) to see what you have, and then you try to make the tastiest strategy with what you’ve got.

Okay, so the process may not look like it came out of a box, but real life is a lot messier than the perfect worlds portrayed in those “How To” books on strategy. We don’t always have all the time, money and resources to make things like they do on those fancy cooking shows on TV. The same is true about business strategy. The goal is not the perfect meal, but rather the best meal given what we’re starting with.

THE PRINCIPLE
The principle here is getting the right balance between standardization and personalization in your strategy. Today, we will talk about personalization. In a later blog we will talk about standardization.

Personalizing a strategy is the process of determining what unique strategy is right for your particular organization. As the great strategist and Harvard Professor Michael Porter likes to put it, strategy is about finding a way to do things differently. If your go-to-market strategy is just like everyone else’s, then you have not given people a reason to prefer you. And if people do not prefer you, then all you have left in order to get them to give you their business is “bribery” (legal bribery). In other words, without uniqueness, you have to buy the patronage of your customers with added discounts or added services that exceed the bribery your competition is using to reach those same customers. This usually leads to an unprofitable situation.

However, if you provide some unique angle to the business, potential customers who prefer that type of uniqueness will flock to your business without the need for excessive “bribes.” The best ways to differentiate yourself are in areas that are hard for others to copy. That makes it easier to “own” the differentiation for a long time.

Usually, the best place to look for that kind of sustainable uniqueness is inside your organization. It is found through understanding the odd little quirks about your business and how you do things. The little nuances that nobody else knows about are often the beginnings of a great strategy. It’s like the refrigerator casserole…a tasty treat made from the unique set of ingredients you have at hand.

The big fancy strategy consultants don’t like this approach, because it isn’t a simple cookbook approach. It doesn’t come from a prepackaged box. You cannot find it by bringing in hoards of freshly minted MBAs who grind out a lot of numbers. Instead, it comes from an intimate knowledge of what makes your organization tick and what makes your industry tick. When you find a way to use that uniqueness to your advantage in your industry, you have a winner.

Let me give an example. Someone dug roads and storage units into the side of a mountain in the middle of nowhere in southern Indiana. A new owner took over the operation, figuring he could do a little local warehousing with it. Unfortunately, because the mountain was in the middle of nowhere, there was not a lot of call for warehouse space.

So then the owner started thinking about the uniqueness of his storage facility. Deep into the mountain, the temperature stays constant all year long…same in the summer as in the winter. In addition, it is a nice cool temperature, almost like refrigeration. After doing some research, he found out that this is the ideal environment for storing tires. So now, out in the middle of nowhere, he runs the largest tire storage operation in the world.

This same environment is also good for storing food. So out in the middle of nowhere, he has one of the largest warehouses of US Government army meals to be found anywhere.

Because it is so dark inside the middle of the mountain, he has experimented with bringing in clients who need to store things that shouldn’t be exposed to light. And on it goes. So out in the middle of nowhere, he was able to become a powerful warehouse operator, because he did research on the uniqueness of what he had and then pitched that uniqueness to others.

Arm & Hammer studied the uniqueness of their baking soda and learned that it had remarkable odor absorbing qualities. At first they thought this was a product flaw that needed to be overcome. But as they thought deeper, they realized that this weakness could actually be turned around into a strength. It opened a whole new growth opportunity for the company.

Heinz had a problem with its ketchup. It was too thick and people had difficulties getting it out of the bottle. They took this uniqueness and convinced the world that thickness is the defining characteristic of a great ketchup.

Perhaps your company has not invested in the latest efficiencies in mass production. Rather than try to copy the state of the art in your business and imitate the efficiencies of others, keep this in mind—just as you don’t have the great investment like the super-efficient operators have, they don’t have what you’ve got, either. And what have you got? Perhaps more flexibility—you can produce products through outsourcing anywhere in the world and go with whomever is best suited to produce that product. Or perhaps you can do custom work or small batch specialty work better than the mass producer. Perhaps while the competitor is putting all his or her resources into production equipment, you can put your resources into brand-building and create a more powerful brand than they have. Perhaps you are in a better position to create strategic distribution partnerships, because potential partners are not threatened by your manufacturing expertise.

This isn’t about finding some generic strategy in some strategy cookbook. Half the time, those cookbooks spout nothing but platitudes, like:

1) Have strong leadership
2) Empower and motivate your people
3) Work on continuous improvement
4) Be more efficient
5) Be focused

This is all well and good, but if you haven’t found that unique nuance that gives you the right to play in the game, it is all for naught. It reminds me of an old comedy routine from Steve Martin. If I remember correctly, Steve Martin claimed to have a foolproof two-step method for becoming a multi-millionaire.

Step #1: Get a million dollars.
Step #2: Invest it wisely.

It leaves out the most important part…where do you get the first million? That’s like those strategy platitudes that don’t tell you how to get the winning uniqueness.

The second problem with these cookie-cutter approaches is that they tend to describe generic strategies, like being a low cost leader or being the best in quality or something like that. Usually those generic positions are already taken, or there are many others vying for that same position. It is better to start with your uniqueness and then build into it quality or low prices. If all you have are lower prices, then you are vulnerable to anyone who can do it cheaper (and someone always seems to come along). But if you have something both uniquely desired, difficult to copy (because it depends on your unique capabilities) AND lowest prices, you have something that is not very vulnerable to attack.

SUMMARY
The best strategies are ones that provide desired uniqueness in the marketplace. The best uniqueness is the uniqueness rooted in the nuances of who you are. That is something that is hard for others to imitate. Don’t envy what is in the other person’s refrigerator. With a little creativity, you can whip up something good out of the ingredients you already have.

FINAL THOUGHTS
I’m reminded of a saying my father used to tell me. It went something like this: Most businesses succeed not because of great management, but because they have such a compelling business proposition that the management cannot screw up enough to stop it. Although this saying is a bit extreme, I think it points out the fact that if I have to decide between spending time and resources with consultants learning the latest fad in management excellence or spending my time coming up with a unique and compelling business proposition, I’ll spend it on the business proposition.