Tag Archives: Strategic management

September 23, 2016 · 11:15 am

Following The Competition

This Foodie Friday I’d like us to think about something you’ve probably seen happen in your town. A restaurant will offer a dish that becomes insanely popular and suddenly everyone is offering their take on it. Cronuts, dishes with foams instead of sauces, or even stuffed burgers (Juicy Lucy’s) are examples. It’s not just restaurants either. One soda brand goes “clear” and suddenly everyone has a “clear” or “crystal” or something similar. The supermarket is stuffed to the gills with innovative products and the several follow-ons produced by competitors.

What does this show us? That businesses pay attention to their competition and are tracking what the other guy is doing. That’s good and important. After all, listening is a fundamental skill. Listening, however, isn’t necessarily reacting. Tracking isn’t following.

It’s not just in the food business. When Ecco had huge success with their hip spikeless golf shoes, suddenly every shoe company had a version. Of course, what the other guys missed was Ecco’s fashion sense, and some of the products were as bad as just wearing tennis shoes to play golf. Microsoft wasted a lot of time and money following Apple everywhere and producing their own versions of Apple products. Still using your Zune?

If you’re going to do your version of a competitor’s product, the impetus for that should be your customers’ expressions of need and not some knee-jerk reaction to what the competitor is doing. First, you might not understand how well the product is selling for the competition. Second, you don’t know what their costs are to produce the dish. Third, even if you do know the previously mentioned data points, you might produce an inferior version which damages your reputation and enhances that of the competition. Finally, and most importantly, follow your customers. Are they defecting to some other brand? Why? Is it to the new product or because you’ve taken them for granted in your haste to follow the other guy rather than them?

Paying attention to what the competition is doing is important but following them can be fatal. Follow your customers, not your competitors.

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September 21, 2016 · 11:37 am

Winners Rethink

At one time in my life, I had aspirations to do music as a career. Even though I no longer have either the band or the hair required to be a rock star I still listen to music and follow industry developments. Because of that, an article on the music industry caught my eye this morning. It comes from MediaPost and its headline reads “Streaming Music Enjoys Revenue Uptick to $3B.” It goes on to report that:

Revenues from streaming services continued to grow strongly both in dollars and share of total revenues. During the first half of the year, streaming music revenues totaled $1.6 billion — up 57% year-over-year. This accounted for 47% of industry revenues, which compares positively with 32% in the first half of 2015.

Impressive growth and reflection on how the business has changed. Spotify, Pandora, Apple Music, and others have changed how people consume this product. What hasn’t changed, however, is how the music business works. In fact, a business model that was written into some laws a century ago still governs how the business operates for the most part. As a result, as Fortune reported a couple of months ago:

Based on almost every metric that matters, Spotify is the most successful streaming music service in the world, with almost 90 million subscribers and close to $2 billion in annual revenues. Yet its recently-released financial results show that despite its massive success, it is still incapable of making a profit—and because of the way the music business works, it may never make one.

You won’t have to search very hard to find many articles detailing how little money artists make from digital music either. So where are these record (pun intended) revenues going? You can probably guess. The people at the record companies wrote the business model, and there are still payments to those companies for things such as “breakage”, physical discs (fragile vinyl when the clause was written into standard agreements) that didn’t make the trip to retail intact. Recently, “New Technology Clauses” were added which charges the artist to ready an album for digital distribution and which are completely unnecessary.

The point today isn’t to rage against the record machine. It’s to point out that this industry and almost every other business has been totally disrupted over the last 20 years. Middlemen serve very little purpose other than to act as legally-protected gatekeepers. Rather than rethinking the business model with an eye toward how to provide value to the customers (the artists and consumers) they serve, the record companies dig in further. They haven’t quite figured out that if they starve the artists and bankrupt the new distribution systems, they too will die.

So ask yourself if the business model in which you operate has been rethought in the last few years. You can watch it happening (finally) in the TV business and countless others if you need inspiration. Winners are rethinking everything. Losers dig in. You?

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September 14, 2016 · 10:42 am

Politics And Your Product

Labor Day once marked the beginning of the Presidential race here in the US. That’s not true any longer as it seems we’re in a state of permanent campaigning. It does, however, mark the start of the final push for the candidates as much of the electorate is really just beginning to focus on the issues that will help them decide the results of this job interview process. Early voting begins in many states quite soon and the airwaves are filled with ads and with pundits trying to sway voters.

As you know, we don’t do politics here on the screed but we sometimes will point out a business lesson we can learn from that world. As I was watching a few of the news channels over the last few days, one issue came up over and over again with respect to the two candidates: transparency. Mr. Trump accuses Secretary Clinton of hiding information about her health, her emails, her foundation, and other things. Secretary Clinton accuses Mr. Trump about hiding his taxes, his business deals, his health, and other things as well. As an aside, I’m not quite sure how any of those issues, help do the most good for the most people, but let’s not digress. The campaign is starting to sound like the old game show: Who Do You Trust?

Both candidates haven’t been transparent and I think that’s led to a “hold your nose and vote” mentality on both sides, at least from what I can tell in speaking to my friends of all political beliefs. Neither side seems particularly enthusiastic about their candidate even if they’re supportive, and even among the ones who are excited there seems to be a recognition that their candidate has some trust issues. I think any observer would say that a lack of transparency is one of them on either side.

There is an expectation that brands – and candidates are brands – will be transparent. This is borne out by research, the latest of which was specific to the food world but I think carries over into any category. Coming from the Label Insight folks it found that:

  • Nearly all consumers (94%) are likely to be loyal to a brand that offers complete transparency.
  • Almost three in four consumers (73%) say they would be willing to pay more for a product that offers complete transparency in all attributes.
  • 81% of consumers say they would consider a brand’s entire portfolio of products if they switched to that brand as a result of increased transparency
  • 56% report that additional product information about how food is produced, handled or sourced would make them trust that brand more

Maybe in the candidates’ minds there is a thought that it’s better to ask for forgiveness than for permission but I don’t think that brands have that luxury. When we know that we’re far better served by transparency than by hiding information that’s critical to consumer decision making, why wouldn’t we choose to open up?

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