“If You’re in a Dogfight, Become a Cat — Strategies for Long-Term Growth” by Leonard Sherman (Columbia Business School Publishing, $29.95).Dogfights in business occur and recur because businesses doggedly pursue market share in product segments that consumers view as undifferentiated. In attempts to maintain or grow bragging rights in commoditized products, they actually throw money […]
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“If You're in a Dogfight, Become a Cat — Strategies for Long-Term Growth” by Leonard Sherman (Columbia Business School Publishing, $29.95).
Dogfights in business occur and recur because businesses doggedly pursue market share in product segments that consumers view as undifferentiated. In attempts to maintain or grow bragging rights in commoditized products, they actually throw money away and watch ROI decline.
Sherman addresses the “why” of market-share dogma: Managers believe they must “compete aggressively to protect their core business.” This results in the constant introduction of minimally-incremental, high-margin product improvements, many of which have no cost-benefit value in the eyes of consumers. By protecting their turf, they ignore other turf.
Case on-point: General Motors lost over $20 billion in the European car market since 2000 while its market share there eroded over 10 points. GM finally decided it had lost the dogfight and sold its European operations to PSA Group, owner of the Peugeot brand. While PSA Group “won,” it bought a severely wounded dog.
Ford Motor, on the other hand, adopted a “cattitude” approach to the European market. It hunted for prey (i.e. identified what was missing) and shifted production to small commercial vehicles and autos that could be built on existing American platforms.
Then there are other markets where cattitude has disrupted everything because old dogs failed to learn new tricks. Disrupter “cats” use technology in their hunt to merge convenience, options and price. Online shopping has turned bricks-and-mortar retailers into money-losing tail-chasers. Digital photography killed film; it's ironic that Kodak shelved its digital program because film was so profitable — it's that “protect the core business” thing. Uber and Lyft changed the personal transportation industry.
While sustaining long-term growth and profitability may be difficult, Sherman believes both can be achieved by focusing strategy on three imperatives:
1. “Continuous innovation — not for its own sake, but to deliver …
2. Meaningful differentiation — recognized and valued by consumers, enabled by …
3. Business alignment — where all corporate capabilities, resources, incentives, and business culture and processes are aligned to support a company's strategic intent.”
Using the product life cycle (introduction, growth, maturity, decline) analogy, he believes that continual new product launches whose growth offsets the declining sales of aging products keeps a business' life cycle in the growth cycle.
When looking at the imperatives, note “meaningful differentiation — recognized and valued by customers.” Just because you can create a new product or add things to an existing product, doesn't mean you should. Bells and whistles become profits only if the customer sees their utility and will pay for it.
Example: Some refrigerator manufacturers are so enamored with technology that they're introducing display screens that will use Wi-Fi to access cable TV programming, streaming videos and music, and synch emails, contacts, calendars, etc., from smartphones. Others are focused more on the basic functionality of the refrigerator by moving water dispensers to the inside of the door, and developing specialty cooling compartments.
A refrigerator should last at least 10 years, while technology ages in dog years. Are consumers willing to pay for a “smart refrigerator” when they know the technology will be outdated in a few years?
Sherman also puts branding into the mix when it comes to meaningful differentiation. He cites two examples: 1. Remember “New Coke”? Coca-Cola replaced its classic formulation and spent big bucks on marketing the “New Coke.” Customers literally weren't buying it. 2. In the smartphone industry, Samsung (before its battery fiasco) touted the many technical advantages of its phones versus the iPhone. Apple consistently reinforced the user experience, seamless integration with other Apple products and its apps. The iPhone holds a market share advantage over Samsung, and over the years incorporated many of the features introduced by “first movers.”
The Bottom Line: Cats always find a way to take advantage of dogs wedded to an outdated business model.
Jim Pawlak is a nationally syndicated book reviewer.
