Oh, they’re not a competitor

Shortly after I became the head of strategy and multi-channel marketing at The Neiman Marcus Group I was asked to lead a strategic planning session for our senior executives. One of the exercises I suggested was a deep dive on our opportunities and vulnerabilities against each of our key competitors. As I reviewed my overall plan one of the top leaders responded, “I like the overall approach, but you need to take Nordstrom off your list. They’re not a competitor.”

Having come to Neiman’s after 12 years at Sears–which I affectionately call my journey from the outhouse to the penthouse–I will admit that my experience in the nuances of the luxury industry was pretty lacking at that point. I certainly understood that a substantial percentage of our customers were fabulously wealthy and preferred brands that you simply could not get at Nordstrom. But I had already learned that many of our shoppers were much less affluent and that we sold quite a few brands that overlapped. Nevertheless, being the new guy–and not especially confident in my hypotheses–I acquiesced. We didn’t talk about Nordstrom.

About a year later my team initiated an in-depth analysis of customer spending and activity trends. Ultimately what we found was pretty disturbing. While our very top spending group was growing in sales and margin rate, customers that represented about 2/3 of our sales had weakening stats.

As it turned out, virtually all our sales growth during the preceding 5 years was driven by raising our average unit prices and the growth of our e-commerce business. After much hemming and hawing about the value (and cost) of doing consumer research, we finally got approval to do a series of studies to understand the underlying drivers of these outcomes. We learned a lot, most of which Neiman’s failed to act upon until the financial crisis hit. But the overwhelming conclusion was that when we lost customers (or a portion of a customer’s spending) the majority of that leakage was to Nordstrom.

Oops.

The point of this story is not to point out the limitations of the Neiman’s culture at that time, nor the power of my intuition. The fact is you don’t have to do much digging to find similar examples of mis-reading the consumer and failing to respond adequately playing out, over and over again, in any and all parts of industry.

Sometimes competition is rather direct even when there is a major value proposition innovation. Flash-sale sites clearly competed for a certain segment of the fashion business. Digital books and music obviously challenged the underlying business models of Borders and Blockbuster.

Sometimes competition might be less direct and its game-changing impact may be harder to glean at first. I’m not sure what the brand management teams at Folger’s and Maxwell House were thinking during the initial growth of Starbucks, but it’s now clear that there was a dramatic consumer preference shift that those brands failed to address–and a huge value creation opportunity that they didn’t participate in.

Even harder to see is when consumers have a more macro-substitution effect. For example, with some consumer segments, we’ve seen a broad and long-term trend to greater interest in personal experiences. This shift has, in many cases, supplanted spending on certain physical goods.

As in most elements of good strategy development the keys are pretty simple:

  • Clearly articulate a data-supported and trackable customer segmentation scheme
  • Stay current on the wants, needs and long-term value of each of those segments
  • Monitor direct competitors and emerging competitors for EACH segment
  • Model impact scenarios for nascent opportunities and threats
  • Develop potential responses and testing plans under each of those scenarios
  • When the time is right test those responses
  • Assume the time is right much earlier than seems comfortable
  • Be prepared to compete with yourself.

And one more thing. If someone tells you “Oh, they’re not a competitor” you might not want to take their word on it.

In God we trust, all others must bring data.

 

Out of an abundance of caution

With recent health scares and a surge in terrorism threats, we’ve heard many public servants justify their actions as being “out of an abundance of caution.” Of course what they really mean is “there’s virtually no chance anything bad is going to happen, but we’d all freak out a bit less if I do this. And, by the way, if anything remotely related to what we’re afraid of occurs, I’ve covered my butt.”

For many organizations outside of the government sector, making decisions “out of an abundance of caution” might as well be in their mission statement.

It’s out of an abundance of caution that we keep repeating old strategies and tactics hoping for different outcomes.

It’s out of an abundance of caution that we keep measuring and rewarding people the same way we have for years despite seismic industry shifts.

It’s out of an abundance of caution that we don’t budget for innovation.

It’s out of an abundance of caution that we keep hiring and promoting folks who look and think just the way we do.

It’s out of an abundance of caution that we’re afraid to experiment.

When government officials exercise overkill on precautionary measures at least they are trying to prevent large number of people from getting killed or injured.

When leaders in businesses or NGO’s do it, they may think they are being prudent. Yet in fact it’s an abundance of caution that is precisely the reason their organization is becoming more risky every day.

 

 

But first you have to believe

I’m all for market studies. And consumer research. And fact-based analysis. I’ve rarely met a 2 x 2 matrix I didn’t like.

I’m all for laying out reasonable hypotheses and putting together a sound testing plan. If I’m honest, I’m pretty solidly in the  “in God we trust, all others must bring data” camp.

But for me there’s no getting around this pesky little slice of reality. More times than not, the truly innovative, the remarkable, the profoundly game-changing, emerges not from an abundance of analysis and left-brain thinking, but from an intuitive commitment to a bold new idea.

More than a decade ago the folks at Nordstrom didn’t have an iron-clad, ROI supported business case when they made the big leap into investing behind channel integration. They believed that putting the customer at the center of what you do is ultimately going to work out.

Steve Jobs eschewed logic and conventional wisdom to pursue Apple’s strategy of “insanely great” products. He believed that leading with design and focusing on ease of use creates breakthrough innovation and customer utility.

Just about every successful entrepreneur adopts a strong and abiding belief in her product or service in the face of facts and history that suggest that, at best, they are wasting their time and money and, at worst, they are simply nuts.

On the other side–with clients and in organizations where I’ve been a leader–a lack of belief that getting closer to the customer is generally a good idea or that it’s okay to fail has resulted in an unwillingness to invest in innovation. Any meaningful action was predicated on a tight business case and, when that was lacking, it was easier to do nothing than to take a chance. All these brands are now struggling to catch up.

Obviously commitment to a belief is not, in and of itself, sufficient. Execution always matters. And there are certainly plenty of strongly held beliefs that are wildly misguided or morally reprehensible.

Yet, when I embrace the notion that just about every great idea starts with a belief not a compelling set of facts–or that often some people see things way before my logical brain can-the field of possibilities expands.

And I believe that sounds like a pretty good thing.

 

 

And then a miracle happened….

During my undergraduate days I remember watching one of my professors work through a mathematical proof on our lecture hall’s chalkboard. This particular proof involved quite a few steps. At one point, as he scribbled the formulas and described his process, several of us noticed that he had made a mistake, thereby rendering it logically impossible to derive the correct result of his efforts.

As he neared the hoped for outcome, the professor paused, apparently realizing that he had somehow gone astray. He looked back at his earlier work. And then back again at where he had left himself. The seconds creeped by as we all waited and wondered how he was going to own up to and undue his error. After a few more awkward moments he finally exclaimed: “and then a miracle happened.” And then, without further explanation, he skipped the last steps and wrote the desired final answer on the board.

Over the years, I’ve noticed twisted versions of this scenario play out in many forms, in ways big and small.

The company that says they are committed to growth and innovation, yet has no real process or meaningful budget to support this goal.

The friend who constantly laments their life situation, yet keeps doing the same thing over and over again, expecting a different outcome.

The sales forecast that’s based on faith, not science.

The talking head who meets resistance to his ideas and simply repeats himself, just more loudly.

The marketer who promotes average products for average people–and promulgates tired one-size-fits-all approaches–and waits for remarkable results.

The political leaders who think we can bomb people into loving and respecting us.

All of them have made fundamental mistakes along the way. All of them can’t own up to and address their errors. If they are honest, all of them are counting on a miracle.

Sure, there is a chance that lottery ticket will pay off. Maybe, just maybe, repeating the same unsuccessful tactics will finally yield a breakthrough. And perhaps there IS a divine force who–after they’ve picked the winner of this week’s SEC showdown and chosen among the Shias and the Sunnis–will turn His/Her/Its attention to whatever it is you are working on and fundamentally alter your course.

Perhaps.

Errant steps, periodic lapses in logic, flat-out mistakes and the occasional embarrassing failure are all normal parts of the human experience. And there’s no good reason to fight our humanity. But there are lots of reasons to examine our beliefs and challenge our default tendencies. There are plenty of reasons to get rigorously honest with ourselves.

From time to time, in some way shape or form, consciously or unconsciously, we are all hoping for a miracle to happen. There is nothing fundamentally wrong with hope.

But hope isn’t a strategy. And expecting a miracle to happen doesn’t really count as one either.

Nobody pays attention at first

Many famous and influential artists toiled in obscurity for the majority of their lives. In fact, some only found celebrity and critical acclaim posthumously.

There are plenty of examples of great spiritual leaders–Siddhartha Gautama and Muhammad come to mind–whose messages were largely ignored early on. It took many years for them to develop anything that could remotely be described as a following.

Most great entrepreneurial ideas are hatched in privacy–or among a very small tribe of like-minded folks.

You’ve never heard of the band you’ll be obsessing over in a few years time.

The next great writer probably hasn’t even written her first book.

And guess what? That blog you’ve been thinking about starting all these months. No one is going to read your first post. Or your second. Or your third.

Much of the time we’re afraid to bring our ideas, our art, our passion to the world because we fear others judgment or ridicule.  Somehow, we tell ourselves–despite never  having practiced–were supposed to be good right out of the gate. So often our ego protection tells us to not even start.

But most of the time, in the beginning, nobody is paying attention. And if we believe this and embrace it it’s actually very good news.

Because nobody pays attention at first, we get to try things out, experiment, be vulnerable, push boundaries, fail better.

Because nobody pays attention at first, we can create largely free of critics and trolls.

Because nobody pays attention at first, we get to practice, for real, not just in our heads.

If we fight through the resistance, if we begin to develop a following, there will be plenty of time for second guessing and reaction to how the world meets our work.

But right now, enjoy the anonymity while you can. And get started.

Just because you killed Jesse James . . .

“Just because you killed Jesse James, don’t make you Jesse James.”

- Mike Ehrmantraut to Walter White, Episode 3, Season 5 of Breaking Bad.

Just because you’ve shot down my idea doesn’t mean yours is better. Defending the status quo can be necessary, but mostly it’s an excuse to stay trapped in our fear.

Just because you sit in judgment of all the “idiot” drivers and “slothful” welfare recipients and “feckless” politicians, doesn’t actually do anything. Though your fragile ego may get a hit for a few seconds, putting others down isn’t a solution. And it certainly adds nothing to the level of discourse.

Tearing down something else isn’t the same as your building something worthy or interesting. So instead of complaining, let’s see your plan.

Being the critic is mostly a place to hide from the hard work of leading us to something new and meaningful. So instead of judging, let’s hear your ideas.

Eliminating the competition may make life easier for a bit, but eventually our art, our projects, our passions have to stand on their own merits.

The universe is listening. And waiting.

 

Collaborate with the unknown

Few truly important things happen in the warm safety of the familiar.

Clearly, the tried and true works some of the time. Yet much of the really interesting and impactful happens as we challenge our self-imposed boundaries and confront the bracing chill of our discomfort. When we choose–and don’t let any one tell you it’s not a choice–to walk through our fear, nearly infinite possibilities come in to view.

Innovation, by definition, implies a dance with uncertainty. Meaningful change occurs when we accept that this might not work, but we forge ahead anyway.

We exert so much energy–and spend so much time–fighting the unknown.

What if we decided to collaborate instead?