This Week in Strategy: How do you roast a cobbler? You make fun of his shoes!
Hi Strat Pack,
What? Did you think we'd really go two weeks without publishing? Well maybe we just might - but not this week!
This week's one liner is courtesy of a tweet that longtime friend of the newsletter Roger sent me. And it's so good. Thanks Roger!
Friends of the newsletter know that bike riding is basically my only form of exercise, and I'm a huge Citibike fan. But not nearly as big of a fan as this Upper East Side teen who rode a Citibike all the way up Bear Mountain. For context, Bear Mountain is about 50 miles outside NYC (he took the train home) and Citibikes weigh 47 lbs and, um, don't go fast. Huang, 19, said he got more than a few comments on the ride — mostly friendly. A few were “sarcastic,” he said, on the order of, “I didn’t know they had those up here.” I love New York. What a time to be alive.
Speaking of New York, the National Weather Service announced that The 2021 Hurricane Season Won't Use Greek Letters For Storms. Turns out the names were Greek to a lot of people, and forecasters worried about creating confusion. "Some of those were very difficult to translate into other languages," says Kenneth Graham of the National Hurricane Center. "In our region we have French. We have Portuguese, Spanish and English." Honestly this quote confuses me a lot. Isn't Greek just Greek? Like isn't it Alpha in English, Dutch, Norwegian, Mandarain or Romanian because it's just Greek? Anyway On the advice of the World Meteorological Organization, Greek letters will be dropped and the National Hurricane Center will just have to have more names ready, just in case, in 2021.
Good to know.
Alright, stop messing around trying to figure out the longest I've ever ridden a Citibike (it was 29 miles and my legs felt like they were going to fall off by the end--those things are heavy!). Let's jump right in.
The one thing to read this week
1) Competitive Considerations [JP Castilin - LinkedIn]
This is a really interesting, really well researched piece.
Competitive considerations are often an inescapable aspect of strategy and, as a result, strategic evaluation. It makes intuitive sense, of course, and most strategists also have a natural inclination to “beat the competition”, “win in the marketplace” and so on.
Arguably the most central theory is that of firm action and reaction under the guise of creative destruction, as defined by Austrian economist Joseph Schumpeter in the early 1940s. In short, he argued that the “perennial gale” of competition was created by extraordinary profits earned by first movers. These motivate competitors to overtake the leader and thereby enjoy the same spoils themselves. Over time, Schumpeter believed, such creative actions and reactions by challengers would inevitably erode the leader’s position, lead to a new apex organization, and the process would begin anew.
Creative destruction relies on competitive considerations for obvious reasons – it is inherent to the fundamental premise. Though first movers do not necessarily need to consider competitors in order to create transient monopolies and abnormal profits (one could hypothetically launch a product or service without considering the market, or create one that had thereto not existed), any response to their actions would automatically be competitor focused. Indeed, the size of the benefit as such would be relative to the speed of the response; abnormal profits would only be achievable by the virtue of rival “lag”. Or to put it slightly differently, actors would gain an economic rent of sorts from successful action, while non- or slow-responding competitors would suffer market share losses or missed profit opportunities. The longer the delay, the wider the gap.
But, contrary to traditional theory, aiming to create and/or destroy advantages is not necessarily the only or best way to do business; neither striving for market share supremacy nor being the market leader is a guarantee for profitability. While share gains can bring a myriad of benefits, there exists, as Besanko et. al. highlight in Economics of Strategy, no causal mechanism whereby they automatically translate to profit. In fact, there is a growing body of evidence to suggest that companies which focus on market share over profitability perform worse than those that do not.
Armstrong and Green summarize the case well in Competitor-oriented Objectives: The Myth of Market Share. They note, among other things, that Boston Consulting Group’s portfolio planning matrix (which analyzes performance relative to competitors and was until recently included in Kotler’s Marketing Management) has been discovered to substantially reduce the profitability of subjects’ decisions. Companies that employed similar strategies were also found to provide lower return to shareholders and deliver lower return on capital.
Granted, one might suspect that companies that focus more on profit would also be more likely to be profitable, if for no other reason than sheer executive and financial prioritization.[2] But that competitor-oriented objectives can be – indeed often are – negatively correlated with profitability is nonetheless important to note for anyone doing strategy in practice. Creative destruction hinges on aggressive competition; efforts to gain market share to maintain leadership, dethrone leaders or reduce gaps held are central to the premise. Porter’s work, of course, does too. However, despite its significant impact on strategy theory and practice alike, it contains practically no evidence at all to support the argument, and his only presented defense has been to repeatedly insist that competition today is no different from competition 70 years ago. This is, shall we generously say, a debatable claim at best, but also a deflection; it does nothing to solve the underlying problem.
Consequently, strategists would do well to question whether competitor-focused objectives and market share goals deserve a place in their work. Setting out to beat the competition may be essential, but it ultimately has to depend on the strategic purpose behind the exercise. Markets are complex, interconnected and best understood in contextual terms, yet seldom if ever zero-sum. Rather, they are in a perpetual state of flux. In some cases, they move towards equilibrium. In others, they move away from it. Failing to acknowledge this point can, particularly for large organizations, be dangerous as it may lead one to miss strategic risks and opportunities alike.
Once again, we therefore find ourselves needing a balance. Understanding the market is never a bad thing per se and it puts performance into perspective. But focusing too heavily on competitors can be; it may lead to imitation at the cost of innovation, reactive behavior rather than proactive thinking, and decreasing profits.
Or to put it slightly differently, masochistic claims for treating markets as theatres of war may lead one to win the occasional battle, but also lose the overall effort.
2) Marketing in Four Images [Jake Sanders - Twitter]
What would be in your "desert island" marketing deck?
(What can I say, I’m lazy and didn’t want to upload each image, so I just embedded the tweet)
3) Cognitive dissonance, conmen and cults: The ways marketers delude themselves [Marketing Week]
This blast from the past article (all the way back to December 2020) is worth a read in its entirety. I've excerpted my favorite section here but please read. It is so easy to get sucked into the marketing bubble and lose sight of the humans we're actually speaking to.
Apparently, the thing about a cult is when you’re in a cult you have no idea that you’re in it. The nature of a cult is it envelops you in a narrative of what is ‘real’ – and trying to wake cult members up drives them deeper into their narrative.
The last few months I have felt that much of the discourse in marketing media and online was entering cult-like territory. In fairness, the wider media can be included in this – and of course, you can point the figure at my suspect reading choices. I cannot be the only one working in marketing suffering from cognitive dissonance – that feeling of discomfort reading the conversations from those working marketing and advertising, and thinking, ‘that is not how others are seeing things’.
Tom Roach, head of effectiveness at BBH, writes that “it’s quite easy to cherry-pick examples to make whatever case you want”. Naturally, that is exactly what I am going to do and select topics that cause me lots of cognitive dissonance, such as sustainability and the environment, the pandemic, and brand purpose. So, here are some cherry-picked examples of what real people are actually doing in the last few months that fly in the face of the sustainability and social activism narrative:
‘Millennials support social causes’: BooHoo was the subject of (rightfully) excoriating media articles about abusive labour practices and excessive pressure on suppliers. What has happened? Sales are up a third year on year and share price is up 10%.
‘Millennials don’t buy cars’: Used car sales are up – and prices are rising. According to the FT, buyers are buying a second or third car rather than use environmentally friendly public transport, due to the pandemic. They are buying diesels; hybrid and electric car prices are going down due to lack of demand. Driving tests for younger people are on the up – with one driving school claiming a 40% increase.
‘We are all in this together’: Er, no we are not. Look out the window.
As for brand purpose, Professor Byron Sharp, like Mark Ritson of this parish (and myself, for that matter), is deeply skeptical about brand purpose. Sharp makes a great observation about brand purpose poster child Ben and Jerry’s. He asks: “How many consumers on the street have any idea about that. I think they would say: “That’s the one with cookie dough isn’t it?'”
4) Department of Great Work
Pepsi is ready to shine a light on an optimistic tomorrow [Foodsided] The reality is that Pepsi, like many people across the U.S. are longing for those days where people just lived in the moment, After a year of distance, separation and concern, people long for those happy moments. Whether this past year has year has been the hard knock life or just making it through another monotonous day, the reality is that a little mess might be a good thing.From VaynerMedia
Everything looks like a pint of Guinness in brand's welcome back ad [AdAge] The spot from AMV BBDO shows a series of black and white objects, such as snow on top of garbage cans, rugby socks on a washing line, a white cat on a black compost bin, white pigeons on a black chimney top and more, before finally cutting to the a pint of Guinness and the long-running Guinness line "good things come to those who wait." It's set to a cover of "Always on my Mind," the classic Elvis track.
Xbox Tackles Elderly Loneliness with Beyond Generations Reboxing Initiative [Little Black Book] This is really nice. Not only is it a beautiful brand film (the first one really starts getting good around 1:40) but the program is such a good idea. ‘Beyond Generations’, an initiative by Xbox and McCann London, is aimed at bridging the generational divide in families, by showing elderly people the relationship-building potential of today’s games, and by getting younger people to start gaming and connecting with the older people in their lives. Beyond the films, Xbox’s broader mission is to encourage families dealing with loneliness to begin connecting more through gaming. Recognising that most elderly people don’t have a console, while younger people often have an old console gathering dust, Xbox is introducing a ‘ReBoxing’ initiative – a subversion of the category trend of unboxing videos. The ReBoxing initiative is a project to empower gamers, who might have recently upgraded to a new console, to gift their old console to an elderly person in their life – the first step in starting to connect with each other. From McCann London
Ad of the Day: Sandy Hook Promise focuses on mental health as kids return to school [The Drum] Prepare yourself, this spot is fucking dark. The kids are not alright. After a year of trauma caused by the ongoing pandemic, 70% of teenagers are now struggling with mental health concerns. As a result, one in four are now considering suicide, which is now the second-leading cause of death among teenagers. ‘The Kids Are Not Alright‘ is the latest in a series of ‘Know the Signs‘ short film PSAs by Sandy Hook Promise and BBDO New York.
Hockey Fans, Molson Made a 'Brewmboni' to Clean Your House [Muse by Clio] 'Part vacuum, part cooler, all hockey' I need this. Introducing the Brewmboni, a nifty robotic combo vacuum/beer-cooler tricked out in Molson colors and imagery. It looks just like a Zamboni ice-resurfacer from your favorite rink. The device removes dirt, grime and spills while keeping up to four Molson tall boys pleasantly chilled. Suck it, Roomba! (By which we mean, suck up those nachos we dropped by the couch. Wouldn't want ants to invade on game night.) From Rethink Canada (Who has just been killing it recently IMO).
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