Failures #2: Leaping the Right Distance

INTRODUCTION

In the last blog, we looked at an article in USA Today article entitled “The 18 worst product flops of all time.” These flops included:

1. Edsel by Ford Motor Co.

2. Touch of Yogurt Shampoo by Bristol-Myers Squibb

3. Apple Lisa by Apple

4. New Coke by Coca-Cola

5. Premier smokeless cigarettes by RJ Reynolds

6. Maxwell House Brewed Coffee by Philip Morris Companies

7. Harley Davidson perfume by Harley Davidson Motor Co.

8. Coors Rocky Mountain Sparkling Water by Adolph Coors Co.

9. Crystal Pepsi by Pepsico

10. The Newton MessagePad by Apple

11. Persil Power by Unilever

12. Arch Deluxe by McDonald’s

13. Breakfast Mates by the Kellogg Co.

14. WOW! Chips by Pepsico

15. Hot Wheels and Barbie computers by Mattel

16. EZ Squirt (colored) Ketchup by Heinz

17. TouchPad by HP

18. Google Glass by Google

We looked at three lessons to be learned from these flops. In this blog, we will look at another lesson to learn: The need to leap the right distance.

LEAPING THE RIGHT DISTANCE

Innovation is a lot like taking a leap into the future. But, as the USA Today article shows, not all leaps are successful. Think of it as being like leaping over a deep canyon. If you can leap from land to land, you succeed. But if you miss, you fall down into the canyon and fail.

Here’s the problem. The canyon of innovation is too wide to cross in one leap. Therefore, to successfully get across the canyon, you need to leap onto a small mesa in the middle of the canyon. Miss on either side of the mesa (too short or too long) and you fail. This is illustrated in the picture below. As we will see, many of the 18 flops failed in part by not leaping the proper distance.

1) Leap Too Short

The first reason for an innovation flop is to leap too short. This happens when your innovation improvements are incrementally too small to matter. Sure, it might be a little nicer or newer or better, but not enough to justify switching, particularly if you are charging an innovation premium price.

The Edsel (flop #1) was a nice car, but the innovations were minor compared to the hype, and the innovations were not enough to justify the premium price. The leap was too short.

Kellogg’s Breakfast Mates (#13) combined cereal, milk and a spoon into one “convenient” package. However, a test showed that the Breakfast Mate was only about a second faster to prepare than regular boxes of cereal with a normal carton of milk. In addition, convenience to the customer meant eating on the go, and you could not prepare and eat Breakfast Mate on the go. Finally, it cost a lot more per serving than the old way. In other words, Breakfast Mates leaped too short. It was not enough of a convenience innovation. The right leap would have been to go to breakfast bars—more convenient to prepare (just unwrap), more convenient to eat (on the go), and not as big a premium.

McDonald’s Arch Deluxe (#12) was a better burger than the regular one, but not enough better to justify the price or to get people to switch from better-burger restaurants. They did not leap enough and build really better burgers worth going out of your way for, like Five Guys.

Apple’s Lisa Computer (#3) was a fine computer for its time, designed for the business market. The problem was that it was not superior enough to justify a $10,000 price. Also, it was not superior enough to grab the attention of software developers to make programs for it. The switching costs for businesses was high and the leap was not big enough to justify the switch.

2) Leap Too Far

Just as bad a mistake as leaping too short is to leap too far. If you innovate beyond the ability of consumers to embrace or beyond the capabilities of technology, then you will fail as well.

The Apple Newton (#10) personal hand-held computing device came out in 1993, before the pervasiveness of the internet. Thanks to that, and the limits of technology at the time, the Newton was not a very powerful device. It tried to be the equivalent of the smartphone before technology, applications, and consumers were ready. It was a leap too far, by almost 20 years.

Premier Smokeless Cigarettes (#5), back in 1988, was also a leap too far. The market had not yet banned traditional smoking as much as today and the technology wasn’t good enough to make Premier Smokeless Cigarettes a pleasurable smoking experience. It took about 25 years before the technology and consumer sentiments caught up to make electronic smoking successful.

One might argue that Google Glass (#18) was also a leap too far. Concerns over privacy and functionality made it perhaps ahead of its time.

3) Leap Too Late

The problem when timing an innovation leap is that if you wait until the innovation is fully accepted, you are no longer imitating…you are following. True innovation has some risks, because you are trying to establish a market that doesn’t quite yet exist. If you wait for the innovation to get a firmly established by someone else, it is typically that someone else who reaps the benefit. They become the brand know for the innovation and get the first mover advantage.

This was the main problem for Hewlett Packard’s Touch Pad (#17). HP waited until Apple made tablets their own with the iPad. HP’s Touch Pad was not meaningfully enough better hardware to unseat Apple. In addition, Apple owned the apps, content business and digital store, where everything was designed to work on the iPad.

Hence, HP failed due to waiting to late.

SUMMARY

Innovation is a leap into the future. If you make your leap too short, you will not create enough differentiation for success. If you make your leap too long, you will get ahead of the customer and technology, which are not ready for success. If you make your leap too late, you become a lesser also-ran rather than a leader. Therefore, when on the path of innovation, plan you leap carefully (length and timing).

FINAL THOUGHTS

Jumping is not the same as leaping, because you end up in the same place as you started when you jump. So, just because you are furiously doing something doesn’t mean you are leaping to innovation. You may only be jumping in place.

Failures #1: 18 Colossal Failures

INTRODUCTION

On April 16, 2016, USA Today had an article entitled “The 18 worst product flops of all time.” It was based on a study conducted by 24/7Wall St. to determine which were the most colossal new product failures since 1950. The 18 flops, and my interpretation of primary causes of the flop, are as follows:

1. Edsel by Ford Motor Co.

Key Mistakes:

·   Insufficient New Benefits

·   Too Expensive

2. Touch of Yogurt Shampoo by Bristol-Myers Squibb

Key Mistakes:

·   Confused Customers

·   Eaten by Mistake

3. Apple Lisa by Apple

Key Mistakes:

·   Too Expensive

4. New Coke by Coca-Cola

Key Mistakes:

·   Misunderstood its Brand

·   Trying to Win by Imitation

5. Premier smokeless cigarettes by RJ Reynolds

Key Mistakes:

·   Innovated Too Soon

·   Questionable Benefits

6. Maxwell House Brewed Coffee by Philip Morris Companies

Key Mistakes:

·   Confused Customers

·   Innovated Too Soon

7. Harley Davidson perfume by Harley Davidson Motor Co.

Key Mistakes:

·   Brand Extension Too Far

8. Coors Rocky Mountain Sparkling Water by Adolph Coors Co.

Key Mistakes:

·   Branding Issues

9. Crystal Pepsi by Pepsico

Key Mistakes:

·   Insufficient Benefits

·   Novelty/Fad

10. The Newton MessagePad by Apple

Key Mistakes:

·   Innovated Too Soon

11. Persil Power by Unilever

Key Mistakes:

·   Defective

12. Arch Deluxe by McDonald’s

Key Mistakes:

·   Insufficient Benefits

13. Breakfast Mates by the Kellogg Co.

Key Mistakes:

·   Insufficient Benefits

14. WOW! Chips by Pepsico

Key Mistakes:

·   Defective Product

15. Hot Wheels and Barbie computers by Mattel

Key Mistakes:

·   Defective Product

16. EZ Squirt (colored) Ketchup by Heinz

Key Mistakes:

·   Defective Product

·   Novelty/Fad

17. TouchPad by HP

Key Mistakes:

·   Innovated Too Soon

18. Google Glass by Google

Key Mistakes:

·   Pros overwhelmed by Cons

Over the next few blogs, we will look at some of the lessons to be learned from these failures, so that you can avoid them.

LESSONS LEARNED

Lesson #1: Innovation is Not a Panacea

These 18 innovation flops were huge, causing losses in the millions of dollars. Yes, they may have been outlyers, since most flops are less colossal. But that doesn’t mean that flops are rare. The article claimed that about 40% of new product introductions are flops.

I believe that the 40% failure number underestimates the problem. A lot of what is considered a “new product” isn’t really much of an innovation. It can be just a minor brand extension, like adding a new flavor or size. It is a low risk/low reward bet on a minor tweak. It is not a truly innovative new product.

If you only look at truly innovative new products, the failure rate is much higher—over half.

I know a lot of companies have a strategy based on some variation of “winning via innovation.” The idea is that future success will come from merely introducing new products. The problem is that if over half of innovations fail (and some fail spectacularly), innovation is not automatically going to lead to success.

Just because you innovate doesn’t mean you’ll win. If fact, the odds point in the other direction.

Innovation is more like a tool than a strategy.

Tools are great, but only if used to achieve a viable strategic purpose. For example, cost control is a great tool but not a strategy. It is meaningless to have the lowest cost of production if you are producing something nobody wants. The strategy must first tell you what is desired. Then, cost control can be chosen as a tool to help make it a reality.

Similarly, it is useless to innovate if you are creating innovations which will flop. Just because something is new does not mean it is the right thing to produce. Innovation only succeeds if you are using it as a tool to implement a greater strategy—a strategy which takes into account all the greater issues like image, branding, positioning, switching costs, consumer trends & habits, etc.

The strategy is the vision of what will win. Innovation and cost control are just some of the many tools you can use to achieve the vision.

Make sure your strategy embraces desirable outcomes rather than just embracing a particular business tool, like innovation.

Lesson #2: Don’t Mess With The Mouth

A friend of mine in consumer research used to say that consumers are particularly sensitive regarding anything that goes in the mouth. They may be forgiving of shortfalls and miscues in other areas, but they expect something a lot closer to perfection when it comes to things put in the mouth. Mess up on things put in the mouth and you will pay a heavy price.

This makes sense, since:

• Health issues are at greater stake;
• Image Issues are at greater stake (You really are what you eat, including the brand image of what’s eaten).

This seems to be verified by the results. If you look at the list of 18 flops, half of them (nine) are items put in the mouth. If you count the fact that people were mistakenly eating the Yogurt Shampoo, it becomes 10 items.

The lesson here is that if you are innovating around items that go in the mouth, be especially careful. People take these more seriously.

Lesson #3: Innovations Need to Work

Some innovations fail because the new product was defective. WOW! chips caused “abdominal cramping and loose stools,” not something desired in a snack food. Persil Power laundry detergent destroyed clothes at high temperatures. The Hot Wheels and Barbie names were put on computers which didn’t work. It’s no wonder why these innovations failed.

You may start with a great idea. But, if the actual product does not deliver on that idea, then the idea is irrelevant. Make sure the product delivers on the promises.

SUMMARY

Innovation is not a panacea for success. On the contrary, random innovation is probably more likely to fail. To minimize failure, innovation needs to be seen as a tool to create a larger strategy. In addition, the innovation needs to live up to the requirements of the strategy and not be defective. Finally, one needs to be extra careful when innovating around products which go in the mouth.

FINAL THOUGHTS

This is just the beginning. Two more blogs on innovation are to follow.

Strategy Planning Analogy #561: I’m Going to be Rich and Famous

THE STORY

One time, I was talking to an expert on the subject of marketing to teenagers. She said research shows that most teenagers believe that in a relatively short time, they will become rich and famous.

The rationale for why most teenagers thought they would become rich and famous went something like this:

a)     They looked at all the rich and famous people in teenage pop culture.

b)     They decided that most of those famous ones are only marginally talented or skilled.

c)     They saw that most of these rich and famous people were also messed up jerks in real life.

d)     They looked at themselves and concluded that they were at least as talented (if not much more talented) than the rich and famous ones AND they had it a lot more together in their personal lives than the rich and famous ones, too.

e)     Therefore, the teens concluded that if those “losers” could become rich and famous, then a more talented and more “together” person such as themselves would have an even better chance of becoming rich and famous. Hence, the teens felt that they were going to become rich and famous.

That’s teenage optimism for you.

THE ANALOGY

If you look at the total number of teenagers alive today (about 25 million in the US alone) and compare that to how many of them actually become rich and famous in teen pop culture (probably much less than 100), the odds of any US teen becoming rich in famous this way is less than 1 in 250,000. In other words, the likelihood of one of these teens becoming rich in famous is less than 0.0004%.

Yet, despite these terrible odds, most teenagers believe they will be one of those rich and famous ones. That seems like foolish optimism, right? Only teenagers would be silly enough to think this way, right?

Well, consider the fact that most business people think they are going to be successful. Most companies adopt strategies that they think will succeed. If you read the press releases or public filings of companies, they almost always seem to talk positively about future success. Even companies with a horrible track record and huge piles of losses talk about how their new strategy will turn things around.

It looks like that silly teenage optimism is contagious. Many businesspeople have caught that same crazy notion that THEY too will beat the odds and be one of the successful ones. After all, why would entrepreneurs put in all the effort to start businesses if they didn’t think they would succeed? Why would companies work hard to implement strategic plans if they thought they would fail?

The logic in the business world tends to be as flawed as in the teenage world. Many think that:

a)     My ___________ (company, strategy, idea, product, people, myself, etc.) is as good or better than a lot of those successful companies out there.

b)     Therefore, if they can be a success, then I should become a success, too.

Yet, we know that most new businesses fail and that a large number of older businesses go into decline, retraction, bankruptcy or some other path that cannot be defined as a major success. Companies fall off the Fortune 500 list all the time. So, is this optimism justified?

THE PRINCIPLE

The principle here is that most truly successful businesses get that way by exploiting the benefits of being a leader. And as we all know, each category can have only one leader. The rest are followers who typically struggle to just stay alive. Therefore, most companies will not be truly successful.

Since the odds are stacked against success, one shouldn’t be like teens who blindly believe that success will naturally come to them. One needs to have their eyes wide open and realize how tough their prospects actually are. Just having a written strategy is not enough. Just doing things well is not enough to ensure success, either.

You have to plan carefully and not only work exceptionally well, but exceptionally differently. This is explained below.

1. Unseating an Established Leader is Exceptionally Difficult

As Al Ries and Jack Trout have pointed out in their many books (most particularly “Positioning,” “Marketing Warfare,” and “The 22 Immutable Laws of Marketing”), established leaders are hard to topple. They have lots of inherent advantages, including:

a)     They own the category in the minds of the consumers.

b)     They have economies of scale.

c)     They have preference in the supply chain.

d)     Habitual patterns are on their side.

e)     Image is on their side (Why would anyone buy from a loser? Doesn’t that make you a loser? Winners buy from winners.)

As a result, Ries and Trout said that just being a little better than the leader is not enough to take that position away from them. In fact, they concluded that one needs to be about three times better than the leader in order to take away their position as leader. Given the unlikelihood that you can imitate the leader and do it three times better, this is a suicide mission. Blind teenage optimism cannot overtake these odds.

Most of the Ries and Trout work was written before the economy was taken over by social media, apps, and digital networking. The laws of networking make unseating a leader in this economy even harder. A network, like Facebook and LinkedIn, gains its power exponentially as their network grows. The value of the business is directly related to the number of connections.

Therefore, to unseat one of these new economy leaders, you have get huge numbers of people to simultaneously abandon the current leader and sign up with you. After all, it’s no fun to join a new network if everyone you want to network with is still with the leader. Even if everything about the way your network works is better than the leader’s, it is worthless if nobody is connected to you. Customer switching costs are so high to leave the leader (where the connections are), that your odds of unseating the leader are as bad as a teenager becoming rich and famous.

Therefore, if you blindly try to unseat the leader at its own game, you will most likely fail, no matter how hard you try, how much better you are or how optimistic you are.

2. Being Different is Better Than Trying To Outdo the Leader

The solution, according to Ries and Trout, is to find a new place to win. Rather than try to outdo the leader at their game, play a different game where the advantages are more in your favor. For example, rather than trying to beat the top burger chain by doing what they do better, do something different, like:

a)     Change the product (Chicken instead of Beef, like Chick Fil A)

b)     Change the image (go further upscale, like Umami Burger or Larkburger, or go further downscale, like Rally’s and Checkers)

c)     Change the customer (go after the health conscious, like Lyfe Kitchen  or go after those who want the best tasting basic burger, like Five Guys or Smashburger)

d)     Change the business proposition (Burger King in Asia does home delivery)

3. Make the Differences a Key Part of Your Plan

Just claiming a new position doesn’t mean you will win. New positions typically require a new business model. Southwest Airlines did not win at the low price differentiation by merely imitating the major airlines and charging a lower price. No, it created a different business model which made lower pricing more profitable, including:

a)     Flying point to point rather than hub and spoke.

b)     Not transferring luggage.

c)     Flying out of secondary airports.

Therefore, your strategy needs to do more than just identify a point of differentiation. It must design a different business model which exploits that point of differentiation and makes the differentiation profitable.

Being different requires acting different. Both differences need to be in the strategy to make it work.

4. Follow Through

A great strategy poorly executed is really a lousy strategy. Don’t be like the teens who think fame will come naturally. Do the hard work to make it happen.

5. Don’t Rest on Past Success

Even if your strategy succeeds today, that does not ensure success tomorrow. Times change, tastes change, technology changes, customers change, regulations change. These changes can make your current strategy and business model obsolete. Being the best carbon paper provider in the age of digital documents is of no benefit, because carbon paper is obsolete. (For those of you too young to remember, carbon paper was used to make multiple copies on a typewriter.)

Just as teen idols come and go, so do successful strategies. Don’t rest on past success.

SUMMARY

Just being good is not enough. Almost everyone operating a business is good or they would already be gone. To be truly successful, change your focus from being good to being different (in positioning and the business model which supports the position). Rather than trying to outdo the leader at their own game, find a new place to lead with a new game plan. Otherwise, you will most likely fail, no matter how optimistic you are.

FINAL THOUGHTS

Just as most teens who thought they could be the next “American Idol” failed at this attempt, most businesses fail at achieving major success. Don’t assume success will come naturally. Do the hard work to find your point of differentiation.

Strategy Planning Analogy #560: Gas and What??

THE STORY

When I brush my teeth, I just put my toothpaste on the toothbrush and put it in my mouth. I thought this was normal.

Then I read an article about the research done by a toothpaste manufacturer. They wanted to figure out what would be the optimal consistency for their toothpaste. Therefore, they did a survey to find out how their toothpaste was used.

The research showed that there was no single, dominant way that toothpaste is used. Instead, there were three common approaches. Some wet their toothbrush before putting on the toothpaste. Some wet their toothbrush after putting on the toothpaste. And what I did (and thought was normal—no wetting the toothbrush) was the least popular of the three.

As a result, the manufacturer had to design its paste to work under all three conditions. So much for normal.

THE ANALOGY

We like to assume certain activities are normal, just because that’s the way we’ve always done it. It doesn’t occur to us to consider alternatives. Our current habitual behaviors seem just fine. There doesn’t appear to be any need to change.

Yet, as we saw with the toothpaste, there are alternative approaches and different ideas about what “normal” toothbrush behavior is. So what seems odd to us can seem normal to others.

This trap often occurs in strategy development. We get trapped into thinking that the way we’ve been doing things for years is “normal” and that any other approach would be odd and undesirable. Just as I thought that putting toothpaste on the toothbrush did not require water, you may think that your approach does not require any additions or changes.

Yet, as the toothpaste story shows us, there can be many viable alternatives out there. And if we do not consider that there can be viable alternatives, we will miss out on many strategic opportunities.  

THE PRINCIPLE

The principle here is that some of the best strategic opportunities may come from looking at options that run counter to what you consider normal. You may have to abandon your ingrained habits and preconceived notions of “how things are done” in order to reach a better condition (a newer, better normal).

We will be using retail gasoline as an example of this principle.

Normal #1: Gas Plus Auto Repair

Back in the 1960s, when I was a child, pretty much every gas station was also an auto repair facility. The gas pumps were in front. Behind them was usually just two stalls for auto repair and a place for a cash register. And that was it.

It was like the gas station run by Gomer and Goober on the Andy Griffith Show on TV. This was normal, and almost nobody did it differently.  

But then the world changed. Cars got more complicated to repair and the tools to do it became more expensive. The mechanics at the gas stations were not skilled enough or had enough money to invest in fixing the newer cars. As a result, auto repair moved from gas stations to large, specialized repair facilities.

The old normal for gas stations became obsolete. If you stuck with the old normal, you were in trouble. A new normal was required.

Normal #2: Gas Plus Convenience Store

The new normal was to convert those repair stalls into a convenience store. It became the strategy of the “eens”: Caffeine (coffee & soda), Nicotine (Cigarettes), and Gasoline. This became the new way to run a gas station and almost everyone used this same basic strategy.

Beyond Normal

Although this became the typical approach, there is no law that says it must be the only approach. Here are some other options in the US.

In the Carolina’s, Sheetz has positioned itself as primarily a great restaurant which just so happens to also sell gasoline. In fact, they are experimenting with hiding the gas pumps in the back in order to improve the image of the restaurant.

In Ohio, United Dairy Farmers essentially operates gas pumps in front of an ice cream store. And this is no one-store operation. They run over 200 of them. You may not think it normal to buy your gas at the same place as you get an ice cream cone, but it is normal in Ohio.

Large, big-box retailers like Costco and Wal-Mart sell gasoline. In addition, many grocery stores use gas stations as a loss-leader for selling more food. The more food you buy, the bigger the discount on gasoline. At some places, if you buy enough food, your gasoline is free.

You can find gasoline pumps in parking garages. Farmers can install large tanks on their own property and pump it at home. The list goes on and on.

The Next Normal

With electric cars, we move from gasoline pumps to electric recharging stations. Where will these end up? In front of convenience stores? They are ending up in all sorts of places, like parking structures and people’s own garages. The rules can be reinvented all over again.

Implications

There are two main implications from all of this. First, just because something is normal today does not mean that it will be normal forever. The gas plus repair shop was normal for a long time but eventually became essentially obsolete. A move to electric cars could make any of today’s mass selling of gasoline obsolete.

So don’t assume that today’s success will last forever. It is a better assumption that today’s successful normal will become obsolete sooner than you think. In your strategic planning, always look for what’s on the horizon that could make you current approach obsolete.

Second, just because the marketplace has defined a normal way of doing things, that doesn’t mean that there are no other viable alternatives. Just as there were three viable ways to put toothpaste on a toothbrush, there can be many viable ways to sell gas. You can sell it with ice cream, a restaurant, with parking ramps or a host of other ways.

Your only limit is your creativity and your willingness to break away from “normal” and do something differently. In many prior blogs, we’ve talked about the benefits of differentiation. If you do things differently, you create a unique appeal that can put competitors at a disadvantage in trying to attack you. Perhaps you should break away from the pack and do things differently.

And these implications do not only apply to the selling of gas. They apply to all businesses. In a prior blog, we talked about all the ways you can sell pizza. If there are a variety of ways to sell gas and pizza, then there are probably many ways to sell your product, including options nobody has done yet. Perhaps you can be the first in a new alternative and reap all the benefits.

SUMMARY

Just because you call something normal does not mean that it is the only strategic option. There can be a whole host of alternative approaches which could be more successful for you than sticking with the normal way. In addition, because the environment is continually changing, even today’s normal could eventually become obsolete, to be replaced by a new normal. Therefore, strategic analysis needs to look outside today’s “normal box” to ensure that you are doing what’s right for you and right for the times.

FINAL THOUGHTS

Every time you fill up with gas at the pump, remember this blog. It can be a weekly reminder to take off the blinders which keep you from seeing alternatives beyond “normal.”

Strategy Planning Analogy #559: Don’t Blame the Racetrack

THE STORY

This past week I was at a large park. This park had a long jogging trail. I watched some of the joggers using the trail.

Some joggers were moving effortlessly along the trail. It was as if they were just gliding on air. They looked like they could go on merrily forever.

Other joggers were bent over and huffing & puffing. Their forward progress was almost non-existent. They looked like they were about to pass out.

Based on my observations, was this a good trail for jogging on or not?

THE ANALOGY

Actually, that’s the wrong question. This was the same jogging trail for all joggers—the ones gliding effortlessly and the ones about ready to pass out. The variation was not in the trail, but in the users of the trail. It wasn’t the trail that determined success or failure; it was the condition of the joggers using the trail.

Therefore, the better question would be: Are you (as a jogger) in the right condition to succeed on this trail?

This is similar to a question I have often heard in strategic planning: Is this a good strategy? Like the question about the trail, it is the wrong question to ask.

Name almost any reasonable strategy, and I will find winners (companies gliding along effortlessly) and losers (those about to pass out) among those implementing the same strategy. Since all of these companies were following the same strategy, it cannot be the strategy which determined success or failure.

No. It was the condition of the company which determined if they were succeeding or failing with that strategy.

Therefore, instead of asking if the strategy is good, we should be asking if our company is in the right condition to succeed with this strategy.

THE PRINCIPLE

The principle here is that strategy success is based in large part on whether there is strategic fit. The greater the fit between who you are as a company and the qualities needed for the strategy to work, the more likely you will succeed with that strategy.

If you want to succeed on that jogging trail, your physical conditioning must fit with the physical requirements of the trail. If there is no fit, you will fail. This is true for both jogging trails and business strategies.

It’s like going to a job interview. All the candidates who make it as far as the interview are smart and talented. But the one who eventually gets the job is usually the one with the personal qualities which best fit with the hiring organization.

Similarly, your company can be full of smart and talented people. But if the company’s culture and capabilities do not fit with the chosen strategy, you will fail with that strategy.

You may observe another company and say, “Look! They’re succeeding with this strategy. That means it’s a good strategy, so if I follow that strategy I should succeed as well.”

But that is faulty reasoning. That would be like the out-of-shape huffer & puffer looking at the physically fit glider on the jogging trail and saying, “Look! That person is succeeding on this jogging trail. That means it is a good trail and that I should succeed as well.”

That logic ignores the fact that the huffer & puffer is not fit for the trail and will never succeed on it, no matter how many others glide by.

When considering fit, here are some thoughts to keep in mind:

1) Most Runners in a Race Lose

In horse racing, only the top three finishers in the race matter—the ones who either win, place or show. The rest are losers. Similarly, in the race to succeed with a strategy, only a small handful really succeed with a given strategy. The rest are all losers.

Take technology. How many wildly successful (and profitable) computer companies are there? Other than Apple and Samsung, are there any other successful smartphone companies? How many companies are winning in the smart watch category?

The point is that one can pull out all sorts of statistics about the how wonderful a particular category is—how fast it is growing, how large it will become, how much money will be spent. It can make the strategy of entering that category look very desirable.

However, in the long run, only a very few companies actually earn meaningful profits in that category. The rest are losers.

Were all the losers bad companies with incompetent people? No. They just did not have as good a fit (culturally, image, competency and capability-wise) in the category as the winners.

Being a good operator is not enough if you want to win. There have been lots of good companies making good technology who lost. In fact, nearly all of them lost. If you want to win, you need a better fit than anyone else.

That requires one of two things. Either only select strategies where your current fit gives you competitive advantage, or change yourself to get in shape for the strategies you want, so that your fit is more in alignment than others.

In the latter case, your strategy becomes a two-step strategy. First, get in shape to have the best fit. Second, pursue the strategy where that new fit is most valuable.  

2) Strategy Choice is Both External and Internal

Strategic Fit means having alignment between what a strategy needs and what a company can offer. Therefore, when choosing a strategy, you have to look both externally (at what a strategy needs) and internally (at what I have to offer).

If we only look at the appeal of the strategy, we are missing half the analysis.

We also need to look at ourselves. And we have to be honest with ourselves and admit to our shortcomings. We have to look into the mirror and see ourselves as we really are.

If we are having trouble with objectivity, we can turn to asking customers and other industry players or consultants to help us see ourselves as we really are.

When former New York Mayor Michael Bloomberg was considering running as an independent candidate for President of the United States in 2016, he did some consumer research (I happened to get one of his surveys). The research convinced Bloomberg he did not have a good enough fit to win, so he decided not to run.

Your research may also show that you do not have the right fit to win at a particular strategy. If so, be like Bloomberg and don’t implement that strategy.  

3) Money Rarely Overcomes a Bad Fit

Some people think that if you have enough money, you can buy your way to success. The problem is that money is relatively easy to obtain. And the ones with the best strategic fit tend to be the companies that find it easiest to get the money.

Therefore, money rarely becomes a differentiating factor. If a lot of companies can get it, then having money does not get you an edge. Besides, the money will be most effective in the hands of the people with the best fit, so even if you have a little more money, it will probably not be enough to overcome a weaker fit.

Just ask the large, cumbersome, bureaucratic companies that had a lot of money but lost out to a small, nimble company that started out in a garage with little cash. Despite having more money, they lost out to the company in a garage because their culture and mindset was a poorer fit. Having more money was not enough to overcome this.

Example

I consulted with a company that was pursuing a broad-based leadership strategy in a particular industry. One of the requirements of that strategy was to aggressively consolidate the industry by rapidly buying up smaller operators. The problem was that this company’s culture was financially conservative and their core competency was not rapid, large consolidation.

As a result, other companies following a similar leadership strategy in this industry were doing a better job at consolidation, because they had a better fit. This meant that the company I was consulting with was falling behind and becoming less relevant as a leader.

Therefore, I recommended that the company shift from a leadership strategy to a niche strategy. The recommended niche was chosen by looking at where this company had a competitive advantage in terms of fit.

Now the company is confident they are on a path that is more likely to achieve success, because the strategy has a better fit with who they are.

SUMMARY

No strategy is universally good or bad for everyone. There will be winners and losers among people using the same strategy. The difference between the winners and losers is how strong the fit is between the strengths of the company and the requirements of the strategy. Therefore strategic planning cannot merely look externally for a good place to be, but it must look internally to ensure that you are the right company to be in that place.

FINAL THOUGHTS

Getting in shape never sounds like fun, but trust me, you will be much happier running the race if you are in shape. Make sure you are in the right shape shape for running the strategic race you have chosen. If you are out of shape for the race, don’t blame the racetrack when you lose.