The
article “Severn Ways to Fail Big” and the article “The Coherence Premium”
together provide me a better understanding of strategic planning. The article “Severn
Ways to Fail Big” depicts a clear picture of what to avoid when making
decisions to shift the long-term strategy, and the latter one talks about how
to identify the capacities from inside and then match them with the outside
market. I find some interesting connections between two articles which enable
me to think more on how to balance between coherence and incoherence, and a
vivid example also comes into my mind: Chinese smart phone producer Xiaomi.
The
power of coherence means that a coherence company will focus on what it does
best in making every decision across every business; however, when a company
finishes its coherence test and finalize what capabilities it has, it may risk
strategic incoherence. This means it can be weak in some segmented market or
lose some distribution channels or any else capabilities. For example, in the
article, Pfizer gave up its OTC drugs and sold out its confectionary products
business as they wanted to focus more on personal health care products and
thought this is the future trend. Well, the root cause behind the seven ways in
where strategist always make mistakes is to have complimentary capabilities.
Strategists decide to merge with another company or roll-up to consolidate many
small businesses, or apply the “pseudo adjacencies”, all because they want to
shift a part of their capabilities, making the incoherence become coherence.
Those seven mistakes are hard to avoid, then the question would be how risky
could be when a company finalizes their coherence and inherence, and how to
balance them according to the future trend.
I
find Xiaomi, a Chinese smart phone producer, as an interesting example. It once
won the Chinese market as 17.5% of total market share by using several coherent
strategies[1],
for example:
·
Compete on the price and customized Android
system with high performance;
·
lower the cost by using social media (as their
CEO is very good at social media campaign) as the main marketing platform
instead of massive off-line advertisements and celebrity endorsements;
·
Increase the profitability by providing further
paid content service mainly attractive to male customers who are keen on
technologies.
It
is clearly here that although Xiaomi achieved its initial success through the
above sample coherences, it took the risks of having a low presence in offline
channels and in female customers who do not care the high performance so much.
As
for now, the risks turn into the crisis. Competitors Oppo and Vivo grew at a
whopping 124% and 74% year-on-year this past quarter, while shipments of Xiaomi
units decreased by almost 40%.[2]
Oppo and Vivo invest heavily in offline channels and the famous reality shows
and also invite the most popular male celebrities to endorse their products,
which can attract the targeted female groups.
Xiaomi
fought back by also increasing their offline marketing spending, as we can now
easily spot ads in subways, buses and malls. In the meantime, they still
maintain their competitive price and features by developing different models. They
also expand to other product categories such as TV box and other emerging
markets such as Indian, their most profitable market with 26% of market share.
In
short, the key takeaways would be to balance the coherence and incoherence by
quickly reacting to the changes, starting shift from the easiest inherence and
trying to find the middle ground between old and new changes. Like the ““Severn
Ways to Fail Big” article said, definitely avoid being distracted and stressed
by the new trends or changes, that lure the strategist to make dangerous
decisions. From my point of view, I think Xiaomi is still doing well. After
all, it is natural to increase marketing spending and move to adjacent markets
when a company grows big. It is an on-going process and worth to be monitored
further.
[1]
[2]
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