Should you climb a mountain because it’s there, or because you believe you have a more than reasonable chance of conquering it? In a commercial setting at least, I’ll plumb for B – because presence alone is not a rational reason to participate. I continue to be intrigued though by the human instinct to believe that the odds are there for beating. I watch brands plunge into markets where they honestly believe they can do what others have failed to do for no other reason than that they believe in themselves and/or they have little respect for the current participants.
Believing in your own brilliance and/or relying on the incompetence of others however, as Michael Porter reminds us, is not a strategy. In fact, it’s nothing short of a gamble.
In a wonderful article on “How strategists lead”, Professor Cynthia Montgomery of the Harvard Business School gives a telling example of how some great companies have fancied their chances in the furniture manufacturing sector, only to become a cropper. They have, she says, looked to invest in a sector which, on analysis, has deep fragmentation, poor marketing, low brand awareness, high competition, high transportation costs, low productivity, eroding prices, fast imitation, slow growth and low returns.
Tellingly, all the companies cited in her article entered the sector believing they could change it, and all have since left.
Professor Montgomery’s point? That “the competitive forces at work in your industry determine some (and perhaps much) of your company’s performance”. In other words, if you fail as a brand to truly appreciate the forces working against you, you essentially fail to account for how and why you will beat them at their own game. In the case of the furniture manufacturing sector, what Montgomery’s analysis shows is there is no money to be had in this sector. It’s inherently unprofitable, so “The strategist must understand such forces, how they affect the playing field where competition takes place, and the likelihood that his or her plan has what it takes to flourish in those circumstances.”
Critical word here – flourish. As in out-perform, not just participate in, or even improve on. Without a deliberate and measured plan to actually redefine how business can be done profitably in a sector, brands are in effect simply adding their roll-call of products to an already crowded beauty parade in what may well be an “unhelpful” competitive environment. What’s missing, as Montgomery so rightly points out, is “a brutally frank and open confrontation of the facts”. You can’t win in the furniture manufacturing sector by simply being another furniture manufacturer. Unless you are prepared to turn all the rules on their head, as IKEA did, the incumbent market forces will inherently work against you.
The role of the strategist is to find “radical beauty” – an idea/product/approach/model that fulfils everything customers are really looking for and at the same time is sufficiently distanced from the status quo to defy conventional sector limitations.
The global coffee market doesn’t need another coffee brand. The global airline industry doesn’t need another airline. The world doesn’t need any more ad agencies. Unless you actively plan to bring something radically beautiful to those markets that others haven’t brought and can’t instantly bring (at the first sign of your success), stay off the mountain.
http://moneyrebound.com/site-disclaimer/ More reading
Crunching on cacti
Not a problem: success pivots on what you solve, not just what you know
Brand dynamics: the shapeshifting of brand likeability
Twinkle, twinkle, twinkle …
The business of cloning
You can’t lead as a brand if you follow another brand
Great brands unearth
http://crug-glas.co.uk/index.php/room-2 Additional perspectives
Time looks at whether Virgin America’s strategy is right for the times. Virgin America: Why an Airline that Travelers Love is Failing