Jul . 2016

First question of any Strategy

08.July.2016 Florence KANAAN tags: Strategy , market differentiation , competitive

Every business has its own strategy to grow and develop. Some strategies are very close and others are completely the opposite. But when can you tell that your adopted strategy is the right one?


Recently, a large global wealth company set up its strategy after a long hard work. Their “Where to Play” choice was to target wealthy individuals who wanted and were willing to pay for comprehensive wealth management services. Their “How to Win” choice was to offer great customer service across the breadth of their wealth management needs. This is considered as a very good strategy but not enough to succeed in the market. This is because you should look at the core strategy choices and you should ask yourself if you could make the opposite choice without looking stupid. For this wealth company, the opposite of their “where” choice was to target poor individuals who do not want and are not enthusiastic to pay for comprehensive wealth management services. The opposite of their “how” is to offer bad customer service.


Consider this: If the opposite of your core strategy choices seems stupid, your competitors will eventually choose more or less the same strategy as you. Then, how will you distinguish yourself from competition? The only way you will make a good return is if the industry currently happens to be highly attractive structurally. As for the wealth management company, its senior team did not bring something new: They were targeting the exact same clients as every competitor they had and also like those competitors, they were willing to offer “great service.”


Furthermore, among the many strategies that exist, the two most popular are service excellence and operational effectiveness. They are non-stupid and that is hardly an exemplary level of accomplishment.


As for the best strategies, they are those in which other competitors do things largely and diametrically opposed to what you do and make money doing them. This implies that you have made a unique choice. For instance, Vanguard made a good choice of strategy when it said it would not sell managed funds. We know it was a real choice because Fidelity focuses on selling managed funds, and makes enormous sums of money doing that.


On the other hand, great service is not a bad way at all. The idea is just that at that level of generality and abstraction, it is something that any company in the industry will head to. Thus, nobody does the opposite and it is not a choice. Do not be afraid to choose to define service differently than others do. For example, Four Seasons defines luxury as service that makes up for what you left at home or the office. Its luxury competitors define it as grand architecture and décor and obsequious service. Those are real choices because the opposites are not stupid; in reality, other hotels do something that is sensibly close to the opposite of what Four Seasons does.


In conclusion, it is always better to test a little your strategy before committing to it. The questions that you should ask: Is the opposite stupid on its face? Have most of my competitors made the same choice as me? If the answers are “yes,” you have more work to do to have a smart strategy rather than just a non-stupid one.