Blog #1: The Strategy of Strategy - There is no "best" strategy for all companies

Key Takeaways:

1.     If you want to create a strategy for your company, you should first recognize the environment surrounding your company.

2.     There are five basic situations for your company. Different industries should apply various kinds of strategies.

3.     There is no "best" strategy for all companies.

 

The consulting company has created the strategic concepts and frameworks in, Bruce Henderson's experience curve, Michael Porter's five-force model, McKinsey's 7S, etc. But how can a company pick up the best strategy for itself?

BCG's partners wrote an article called “your strategy needs a strategy”[1], providing a perfect framework to solve this problem. The strategic choice of an enterprise is to have a comparative competitive advantage over its involvement in the long term. Therefore, the company's current market environment, competitive landscape, surplus, and other factors are divided into the framework of strategic choice. BCG's research uses the idea of ​​segmentation, which is a common practice in consulting. It finds two dimensions of predictability and malleability to distinguish the prospects of enterprise selection strategies into five scenarios, divided into different single strategies and divided into each situation. To simplify the strategic choice of the enterprise.

 

According to the article,

• If the company is in a stable and malleable market, the company should adopt a classical strategy and obtain a sustainable competitive advantage by looking for the best positioning.

• If the enterprise is in an unpredictable and non-destructive market, the enterprise should adopt an adaptive strategy and take the lead through temporary and continuous adjustment of development. Formulating a strategy in an adaptive environment requires catching signals of environmental changes, managing various experimental programs, and gradually responding to changes in the background. The success of Zara's flexible supply chain is a good example.

• If the company is in a market with high predictability and the opportunity to reinvent it, the company should adopt a visionary strategy to find and apply major trends before other competitors. iPhone's shaping of the smartphone industry is a successful case.

• If the enterprise is in a market with low predictability but high malleability, the enterprise should adopt a shaping strategy and formulate industry rules to allow it to develop in a direction that is beneficial to itself. Modeling companies should attract the participation of other stakeholders. In the competition between Blu-ray and HD-DVD, Sony defeated Toshiba by obtaining the support of video content producers.

• If the company faces a harsh living environment due to previous mistakes, the company should adopt a renewal Strategy. After ensuring survival, turn to growth, and choose one of the other four strategies. Gerstner's reform in IBM fits this strategy.

 

All in all, the enterprise strategy should be selected with consideration of the external environment. Choosing the right strategy will get twice the result with half the effort; otherwise, it will get twice the result with half the effort. Imagine that if Jobs chose an adaptive strategy when he should adopt a strategy, he could not use such a functional iPhone.

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[1] Your Strategy Needs a Strategy. https://hbr.org/2012/09/your-strategy-needs-a-strategy

Blog #1: Technology as a Force, Not Factor: How Porter's Five Forces Can Apply Today

The fourth industrial revolution as outlined by McKinsey & Company (Dobbs et al 2015), brings a whole slew of considerations to industry giants as the benefits of digital transformation, innovation, and combinatorial technological expertise become less of a desire and more of a necessity to survive. In many ways the framework of Porter’s Five Competitive Forces that Shape Strategy have been weakened in its relevance to today’s market forces and must be reworked to understand the confluence of these forces as an interdependent woven fabric that places greater weight on technological innovation more than ever before. Yet, there exist counterweights for these market forces that can be used to slowed down or inhibit disruption, for better and for worse.

Porter’s exploration of market forces deems technology and innovation as a factor and not a force. In many respects, Porter’s assertion is correct as technology alone does not sell; it requires strategy and a need for mobilization of other resources—capital, labor, skill, and networks—to be able to create profit and capture dominance. However, the shortcoming here is that within recent years and much after the publishing of his book, Porter was unable to predict the exponential growth of technological innovation and use that underrides the very foundations of present markets.To put this in perspective:

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Within 12 years alone, from 2000 to 2012, we have seen global online traffic increase 500-fold. That is why five of the ten largest US companies by market cap are horizontal platforms, who cut across value chains due to our shift to an online world and an age of connectivity. When companies take advantage of this, they can disrupt even the most traditional and restrictive markets. Take for example, Noble Iron, started by Stanford Business School alum Nabil Kassem, took advantage of the platform capability and the any-to-any business model, and disrupted the construction industry by renting and selling heavy construction equipment. As the “Netflix of Construction Equipment,” Kassem impressively built a $20 million business in the midst of a 2008 recession. His strategy was enabled by the advent of new technology, the shift of consumers to online platforms, and the ability to bypass distribution channels. We should not underestimate how capable new entrants are of bypassing distribution channels as we know that “technology allows businesses such as WhatsApp to start and gain scale with stunning speed while using little capital” (Dobbs et al 2015).

Evidently technology is a force and the only way to take full advantage of its force is through “combinatorial effect”—combining various technological tools to aid in your strategy to disrupt markets. Yet, there are “factors”, according to Porter, which I believe can inhibit these disruption. Government policy will catch up with any-to-any models to limit disruption, as was the case with TLC and Uber (TheVerge). Additionally, the platform players like Google, Facebook, and Amazon will continue to dominate due to their ability to put large resources toward R&D. And ultimately, as technological innovation effects on productivity plateau and our population ages, more importance will be placed on retaining, capturing, and keeping talent as way to stay on top of technological disruptions. The race to digitize has never been more important, and companies will face the decision to digitize or flop.

How we can develop better strategy by eating cornbread.

Cornbread.  Ain't nothin' wrong with that!

Many of you might have seen an article that was making the rounds on the internet a few months ago titled "7 Reasons This Muffin Mix Can Save America."  Go ahead and read it if you haven't yet.

How many of us can say that we had a complaint about a product?  And how many of us can say we actually spoke to the CEO of the company, not just some marketing or customer service intern saying that they'll pass the word on?  Cory Suter was not only able to see behind the curtain of Chelsea Milling Company (the parent company behind Jiffy Mix), but was able to bring about certain changes in the company.  Mind you, Cory Suter is not a marketing genius or a business marketing guru; he's just a simple blogger who wanted to voice his concerns with a company that he supported, and unexpectedly, they actually listened.

So you may ask what this has to do with strategy.  Fundamentally, strategy has everything to do with how successful [or unsuccessful] your business might be.  Several methodologies used by Jiffy helped them be very successful.  They chose not to dump money into marketing via advertising, or making flashy boxes to catch the eye of consumers in the supermarket aisles.  The packaging has more or less been the same since creation, and the mixes are adequately priced so that it can be consumed by the masses.  Much like how the Ford Motor Company wanted to make vehicles affordable for everyone, Jiffy tries to make good quality but cheap costing products that can be found in any home any given day of the week.

They've also decided that even with their 55% market share of all corn muffin mixes across the country, that they were going to stay in local, family-controlled ownership.  There are no stockholders to keep satisfied, but rather a CEO who cares about what goes out of the doors and onto the shelves of millions.  Creating this message and keeping it consistent is one way Chelsea Milling Co keeps their brand held in high regard.  They have roughly 350 employees, and CEO Howdy Holmes knows most of them by first name.  He makes sure that they are paid well (at an average salary of $47,000/year) and that in the same breath, his products don't cost an arm and a leg to purchase.  "Most Americans don't have two homes or much extra money to spend on things that aren't necessary," Holmes said.  "We provide high-quality ingredients at the best price to help as many customers as possible."

Chelsea also breaks the traditional trends of being strictly profit-driven.  Again, there are no shareholders to please, and considering that the original recipe for Jiffy Muffin and Corn Bread mixes came from Holmes' grandmother, he wants the level of quality to be there without worrying about how much money he'd see in his bottom line if he would just raise prices or lay off some staff.  This keeps morale and brand loyalty high for the company.

They also consider honesty a big part of their culture.  For example, on the front of their blueberry muffin mix packages, Jiffy claims that their product is "artificially flavored with imitation blueberries."  One of their competitors, Betty Crocker, has a premium blueberry muffin mix which costs twice as much and have their blueberries saturated in high fructose corn syrup and artificial flavors.  There are no labels signifying that you're not getting the real deal with Betty Crocker, but Jiffy doesn't hide it from the customer.  It's consistent with their core values of honesty and integrity, and it shows.

If you read further in the Suter post, you may see that others asked in the comments about Jiffy's use of GMOs, or genetically modified organisms.  GMOs in food means that genetic modification is used to modify the components in their products to make them survive in inclement climate regions or to stave off bugs or bacteria or serve as preservatives.  There has been a crusade to stop the sale of GMOs in grocery stores or to have them labeled up-front.  Holmes responded to the concerned customers and shown that for products such as his corn muffin mix, 88% of the corn brought into the US is GMO.  Only 12% is not GMO, which is why they haven't made the switch.  While you may choose to avoid eating Jiffy because they use GMOs and imitation material, many customers feel that this full disclosure and honesty is a good reason to support the company, and thus why they have found so much success over the years.

Friedrich Schock, the CEO of Schock Holdings, GmbH had a great quote in regards to success.  "Success means 'it follows' in Latin.  Success is something that follows, the natural result of behaving right - not the number one target in your life."  Mr. Holmes has certainly figured out a way to be successful, and it's in no small part thanks to the culture he has created with his company.  While his approach may not work for everyone and for every business, it's certainly an "idealistic" model that has proven to be sustainable through the bigger part of a century.  Focusing on creating happy customers and happy employees can indeed lead to success.

Sources:
1. Suter, Cory.  "7 Reasons This Muffin Mix Can Save America."  Web.  http://www.policymic.com/articles/30626/7-reasons-this-muffin-mix-can-save-america  March 2013.

How a great leader can transform an entire market by one strategic decision

I would like to go back to December 13^th 2008, when I had the opportunity to meet up with Jimmy Wales, the creator and founder of Wikipedia. Wikipedia Academy was being started in Chennai, India, to encourage people to contribute back to Wikipedia and Jimmy Wales and Sue Gardner had flown down to Chennai for the event. The talk that I had with Jimmy gave me an insight of how he has become the leader of this massive “movement” Wikipedia. I was questioning him about the success of Wikipedia and he had this to say, “Wikipedia grew a lot just before the dot com burst and then the dot com burst happened. We were losing money during the time and we couldn’t pay our own employees, and there was a decision that I needed to make. I either had to close Wikipedia, save the remaining dollars and send my employees home, or think of something to save the company.” What he came up with was a really unique concept the world wasn't used to at all. He decided to stop moderating the articles submitted to Wikipedia and instead allowed open editing by public, placing trust in the power of people. The rest as they say is history. Jimmy also told that if the dot com burst didn’t actually happen, Wikipedia would have still been a moderated encyclopedia and it might not be as famous and as open as it is now. He was certain that the so called dark times in every industry and recessions are the times when the confident and brightest entrepreneurs actually take a brilliant step and become a market leader or create a market that is non-existent as of now. He also told that presently all countries are in recession and this could be the time for young entrepreneurs to step in and grab their opportunities. (This was back in 2008)

Just to add authenticity to my claims ;) During the Wikipedia Academy meet up

Wikipedia has grown leaps and bounds but Jimmy is still sticking to his two ideals, “Trust in people” and “No Ads”. There are statistics which show that only 0.1% of the viewership of Wikipedia actually contribute back in making articles and this 0.1% is making such a huge impact themselves in having this much of information with regular updates and amazing accuracy. The latest strategic decisions in Wikipedia is to get people to contribute in English as well as in the regional languages and maximize the impact of people by setting up Wikipedia academies around the world. So how does Jimmy manage Wikipedia without ads? Who pays for their operating expenses? It’s again the people. Every year wiki goes down on its feet and asks for donations to cover the estimated cost it would require over the year.

So why do you think this post would make it's way to a strategy blog? The first one is when I was reading through “Do you have the right leaders for your growth strategy”, I was reminded of the leader that Jimmy has been and his influence in the growth of Wikipedia (the performance evaluation criteria for Wikipedia was growth of viewership back then and their biggest goal was to make the costly encyclopedias’ obsolete). On a personal note, I feel that Jimmy was a brilliant leader who was completely tuned to the market even during really hard times like the dot com burst. One more thing that caught my eye was that he was an optimist. It does work wonders when you have leader who is an optimist. Was this a blind decision by Jimmy Wales to make the company open to public editing without moderation (or did he just turn lucky)? I believe not, the conviction with he did it showed that he had a structure of something like Wikipedia (at its majestic present state) in mind. Was the risk worth it, is something that is open to speculation. If he had not taken the risk back then, there would be no Wikipedia now and the advent of open source would have been further delayed. Risk taking might be considered reckless but Jimmy was confident in his idea and I believe that this one strategic decision by a great leader has transformed the entire market and has shown the world that there is still "hope" in the power of people.

References:

Do you have the right leaders for your growth strategy? - Katharina Herrmann, Asmus Komm, and Sven Smit