In 1964 Supreme Court Justice Potter Stewart was struggling to define what obscenity is and finally resorted to “…I know it when I see it.” Business strategy is a bit of the same, so let’s talk about some examples.
Here is are some excerpts from my book, “Never Kick a Cow Chip on a Hot Day—Real Lessons for Real CEOs and Those Who Want To Be.”
Business Strategy #1: Surviving Wal-Mart
To get you started, I have a quick story to share. A friend of mine had inherited a mess. His father had run a chain of grocery stores in another state and had passed away, leaving my friend to run the business. With ownership dispersed among quarreling family members who had different expectations, the only logical thing for him to do was to clean it up to the best of his ability, package the business, and then sell it and ride off into the sunset.
With this rainstorm looming, my friend knew that his solution was not about working harder or executing better. It most certainly was not about “hoping for the best!” His vision didn’t change, but the way he ran the business had to, or he’d be out of business in a flash. His response? Change his strategy.
Then he heard that Wal-Mart was coming. He knew that he had to do something differently. He engaged his team in a conversation about how they could compete against a competitor that had a lower cost of doing business. How could they succeed while still charging more?
They also wanted to differentiate how they interacted with their customers. They recognized that providing high levels of interaction was not Wal-Mart’s strength, so they trained their coworkers to do some fantastic things.
As he somewhat reluctantly jumped into his role as CEO and constant family counselor, he got some further bad news. Wal-Mart was coming to town with their grocery store concept. He did some research and discovered that on average, when Wal-Mart came to town, the juggernaut took a large chunk of business away from existing grocery stores. Since grocery stores run on very thin margins, a double-digit percentage loss of revenue would quickly send them into a pool of red ink!
His product was like everyone else’s (canned beans are canned beans!); he offered no services, the relationships he had with his customers were undifferentiated, and his distribution model was like most grocery stores—brick and mortar locations on busy streets.
They realized that they could not effectively compete in the “middle of the store” where the cans of green beans resided. However, they could compete around the edge of the store where produce, meat and fresh foods resided, as Wal-Mart was not strong in those areas. They enhanced their produce and meat sections. They brought in local goods that Wal-Mart wouldn’t carry. As their stores were in the Southwest, they brought in tortilla stands where fresh, hot tortillas were handmade on the spot.
Business Strategy #2: Crossfit Turns It On
Exercise fads come and go faster than Jane Fonda can put on her leotard. However, in 2000, a guy by the name of Greg Glassman created something called Crossfit that took the fitness world by storm. Crossfit grew to over 10,000 gyms (they call them “boxes”) in 12 years. The workouts themselves are worthy of an entire chapter, but what interests us is their strategy—“what” they are doing to grow the business, enhance health and well-being, and once again, monetize “community.” The program, the boxes and Glassman’s idea on how to make money are radically different from other “globo-gyms” and franchises. In fact, he passes up many opportunities for revenue simply to keep the system pure. Licensing the name, providing support and training to the box owners, all while allowing the individual owners complete flexibility is a long way from franchising. Warning: If you engage in conversation with a Crossfitter, your eyes will glaze over before they quit talking about the benefits. Crossfitters are not just gym members; rather, they are members of a tight knit community (called a cult by some) who simply share a specific form of exercise as the platform.
Business Strategy #3: Beyond Books
Year after year, my publishing client continued to bang out great results in spite of all of the press about publishers going broke. However, he had a subsidiary that was in trouble. Growth was declining and their market segment did not appreciate the relevance of the books that they were selling. Better books were not going to save the day. Selling harder was not going to win the battle. They had to re-tool what they were doing and think of themselves as solving problems, not selling books. Within several years, they had multiple revenue streams offering multiple solutions to the problems of their marketplace. They had transformed themselves from a product company to a market-driven company with different strategy. And most important, they were back to double-digit growth!
Business Strategy #4: Competing With Giants
When it comes to strategy, there is a myth that small companies cannot compete with global giants. But in my hometown of Boulder, Colorado a hardware store by the name of McGuckins holds their own, even with the large shadow of Home Depot just down the street. How many of you have a local hardware store near you that is flourishing? They keep the cash registers ringing because they have a unique way of competing. With more than 200,000 items in stock and a flock of “green vests” (their term for the knowledgeable employees on the floor—many of them former plumbers, electricians, etc.) they are hard to beat. One night many years ago, I had a critical light bulb burn out in an airplane that I was scheduled to fly. I had to replace it before my flight. I brought it into McGuckins. “I have one of those in back!” said the green vest.
Somehow I knew that they would. Local hardware stores are not supposed to be able to compete anymore, but they prosper because they have a different strategy and execute it well.
What happens if you don’t have a clear business strategy?
I once worked with a highly paid management team in a large company that did not have a clear strategy. As industrious people abhor a vacuum, several of the senior people created their own assumptions around an assumed strategy. Two of these people who both had a large influence and very large budgets—the Chief Technology Officer and the Chief Marketing Officer—spent money like drunken sailors on competing projects and visions. The results were disastrous; they wasted large sums of money and literally accomplished nothing in the process.